The S&P 500 has gained roughly 13.5% since the start of the year, adding approximately $9 trillion in market capitalization. However, excluding AI-related stocks, the US equity market has slightly lagged the European STOXX 600 index, which rose about 5.6% over the same period.
An index of "old economy" companies that excludes AI names has gained just 5.5% since January 1. BNP Paribas economists James Egelhof and Andrew Husby noted in a client note that the European bloc likely missed out on the AI investment boom. While the US outperformed Europe before the launch of ChatGPT in November 2022, the current capital expenditures boom has disproportionately accrued to US markets, magnifying an existing advantage rather than creating it.
Global AI investments are expected to exceed $1 trillion this year, growing to roughly $1.4 trillion by 2027 according to Bank of America research. Hardware investment remains concentrated in North America, with the US and Canada accounting for roughly 60% of new data center capacity additions in 2026, compared to approximately 10% for Europe, per Goldman Sachs. The US hosts about three-quarters of global computing capacity, while the eurozone hosts only 5%, according to European Central Bank data.
Europe is participating in the AI sector, but through different channels. S&P Global data indicates that eurozone manufacturing activity is on its biggest growth kick in more than four years, led by Germany. Eurozone firms are expected to devote around 10% of their investment to AI in 2026. Goldman Sachs analyst Giovanni Pierdomenico estimated that AI investment should add roughly 0.1 percentage point to European GDP growth in 2026. However, more than half of this expected growth impulse comes from spillover effects generated by investments outside Europe.
European equities currently offer a higher free cash flow yield of roughly 5.5%, compared to a US average of 3.5%, according to Goldman Sachs strategists. Market breadth in Europe has also been more stable, with the median European stock outperforming the median US stock through 2026. Despite these metrics, European economic headwinds persist. Euro-area GDP for the third quarter is tracking at just 0.2% growth over the previous period, per Goldman Sachs. German manufacturing orders dropped 10.6% month over month in August, and French industrial production excluding construction fell 0.8% quarter to date.
Inflation across the eurozone has risen markedly due to the energy crisis catalyzed by the war in Iran, with monthly readings in Germany, France, Italy, and Spain exceeding economist estimates in September. Political instability in France ahead of the 2027 presidential election has pushed the spread between French and German bonds to its highest level since the 2012 euro sovereign debt crisis.
US hyperscalers including Meta, Microsoft, Amazon, Alphabet, Oracle, and SpaceX have issued hundreds of billions of dollars in debt to fund capital expenditures. These companies now account for roughly 10% of new euro bond issuance by nonfinancial firms, tapping European savings to finance US infrastructure builds according to Apollo Global data. European Central Bank President Christine Lagarde stated that Europe will pay for this boom whether or not it shares in the growth.