By Lucy Raitano
London (Reuters) -A route in shares of European companies that embrace artificial intelligence, deepens this week, because powerful new AI models raise questions about whether sectors from software to data analysis can be overtaken by the technology.
European software shares, including SAP from Germany and the Dassault systems of France, tumbled on Tuesday to ensure that AI will disrupt the software sector through the market. That followed on a downgrade to the American rival Adobe on Monday by broker Melius Research.
Since mid-July, shares in markets and Datacroup LSEG, the VK software company Sage and the French IT consultancy group Capgemini have fallen 14.4%, 10.8% and 12.3% respectively.
Such companies – AI -Adopters mentioned by analysts – invest heavily in technology to strengthen their products and services. In the midst of a lack of European AI companies and suppliers, they had benefited their shares because investors in the region were looking for a way to tap the AI Boom that flows the American markets.
But the release of increasingly powerful AI tools seems to have led to a reconsideration of some market players.
Last week, OpenAI launched his GPT-5 model, the latest iteration of the AI technology that contributed to the transformation of the global company and culture since Chatgpt arrived at the end of 2022.
Kunal Kothari, a fund manager at Aviva Investors, also pointed to the release of July 15 of Anthropic’s Claude for Financial Services.
“The app that came out has now challenged an investment case around London Stock Exchange (LSEG), around the provision of financial data,” he said.
“We are now in the stage with every iteration of GPT or Claude that comes out … They are multiples better than the previous generation. Thinking the market:” Oh, wait, that challenges this business model. “
The decrease in the shares of European adoption contrasts with wider market wines. Since mid -July, the FTSE 100 of London has risen by 2.5% and the Stoxx 600 from Europe by 0.6%, while American indexes have scaled record heights, largely driven by technical shares.
The worsening of things is the fact that many European shares of the adopteur shares act on high multiples, making them vulnerable to potentially negative news, according to Bernie Ahkong, Chief Investment Officer at Hedgefonds UBS O’Connor.
The Stoxx 600 acts with an average price-to-win multiple of 17 times, while SAP-Wiens shares have fallen since mid-July 7.2% since mid-July after placing their biggest daily decrease since the end of 2020 on Tuesday-trades about 45 times.
Will AI eat software ‘?
Although many AI shares on the AI struggle, some investors say that markets will eventually follow a more systematic approach, choosing potential winners and losers.
“At the moment it feels like the market just photographs first and places them all in a” challenged basket, “said Aviva’s Kothari, referring to the decline in British AI adopters.
The hype around new AI models has led to the re -emergence of comments from 2017 from Jensen Huang, the CEO of AI Chipmaking Behemoth Nvidia, which “will eat AI software”.
“We don’t disagree, but we believe that any definition is justified here, because not all software companies are equally exposed,” says Steve Veford, portfolio manager of the Global Thematic Equity team at Lazard Asset Management.
He said that those with software deeply embedded in workflows from customer companies, or with difficult data that is difficult to replicate, still had strong competitive benefits.
Paddy Flood, Portfolio Manager and Global Sector Specialist, Technology, at Schroders, said it was important to distinguish between different types of software.
“Enterprise-grade applications are less exposed, given their mission-critical nature, the complexity involved in replacing it and the value of a trusted supplier that provides continuous service,” he said.
Kothari from Aviva also marked the benefits of having software that is deeply embedded with customers, and referring the UK Credit Data Firm Experian as an example.
“It has a lot of data that is unique, but it is also enormously embedded in the workflows of financial institutions. They want to do a loan, they need experonial,” he said, also emphasizes the method of Britain.
He has both shares, together with LSEG, but warned that own data might no longer be enough to protect companies.
“I just don’t think data is a canal more,” he said.
The sale in AI Adopter shares can be an opportunity for investors to choose the winners, said Ahkong of UBS O’Connor.
“Some of the affected names will actually be able to use AI as an opportunity and in the rugwind for income, but must prove that from here and that will take time,” said Ahkong.
But how much time the companies have is unclear. Some investors warned earlier this year that the clock tapped for large spenders to AI to show returns.
(Reporting by Lucy Raitano. Edit by Amanda Cooper and Mark Potter)
