As the artificial intelligence (AI) boom continues, European companies pouring billions into generative AI must start delivering tangible returns—or risk losing investor confidence. With market valuations sky-high and economic uncertainties mounting, investors are becoming more selective, shifting their focus from AI hardware suppliers to companies that are actively adopting AI technology.
The Shift from AI Suppliers to AI Adopters
For years, AI chipmakers and hardware suppliers, such as Nvidia, dominated the market. However, the launch of DeepSeek—a low-cost Chinese AI model—sparked a selloff in AI-related stocks, forcing investors to reassess their strategies. Now, European investors are showing a clear preference for AI adopters—companies that integrate AI into their business models—rather than those simply supplying AI-related infrastructure.
Companies like SAP and RELX, which leverage AI to enhance operations, have outperformed AI suppliers in recent months. Meanwhile, chip equipment manufacturers like ASM International and BE Semiconductor have seen their stock prices plummet by 25% and 20%, respectively, since the DeepSeek selloff in January.
However, while AI adopters may currently have the upper hand, investors are growing impatient. Without concrete returns, they may lose interest in AI-driven companies as well.
Investors Set a 2026 Deadline for AI Profitability
Many investors remain bullish on AI’s long-term potential. However, a recent Fidelity survey revealed that 72% of analysts do not expect AI to significantly impact corporate profitability in 2025. While some foresee major benefits within five years, many investors are operating on much shorter timeframes.
Lazard Asset Management’s Steve Wreford warns that investors won’t tolerate “unfettered investment” in AI without seeing clear financial benefits. He believes AI adopters may get a pass in 2025 as they roll out beta tests and trials, but by 2026, companies must demonstrate significant revenue growth.
The stakes are high. AI-exposed stocks trade at an average price-to-earnings (P/E) multiple of 17x, while AI adopters like SAP and LSEG trade at 90x or higher. If these companies fail to justify their premium valuations with concrete results, investors may start reassessing their worth.
The Search for AI’s “Killer Use Case”
The biggest question in AI investing remains: Will companies develop game-changing AI applications that justify continued spending?
Paddy Flood, a portfolio manager at Schroders, believes that AI’s long-term success hinges on finding a “killer use case”—a single groundbreaking application that businesses and consumers are willing to pay for. Without clear revenue-generating applications, AI’s high valuations may not be sustainable.
Similarly, Amundi’s Fabio di Giansante points out that much of the current AI hype is centered on orders and capital expenditures. However, investors need to see real financial benefits—higher revenues and improved margins—to remain confident in AI’s profitability.
Will 2025 Be the Make-or-Break Year for AI Investments?
As the year progresses, investors will closely monitor AI companies to see whether their massive investments translate into profits. While some are willing to wait until 2026, patience is running thin. By the end of 2025, companies must prove that AI isn’t just a hype cycle but a true economic driver.
If they fail, the AI bubble could start to deflate.
