Strip out AI stocks, and the US market lags Europe

If you've ever wondered what the US stock market might look like without AI, look no further than Europe.

The S&P 500 ( ^GSPC ) has gained roughly 13.5% since the start of the year, adding roughly $9 trillion in market capitalization as the tech sector's run has lifted the entire index even as other sectors have faltered.

But strip out AI-related stocks, and the picture changes. Remove those companies, and the US equity market hasn't beaten Europe — it has instead slightly lagged, as European markets have found their own strength. An index of the so-called "old economy" that removes AI-related names has gained just 5.5% since Jan. 1. Europe's STOXX 600 index ( ^STOXX ), tracking the leading 600 companies in Europe, has gained roughly 5.6% over the same period.

"The bloc has probably missed out on the AI investment boom," BNP Paribas economists James Egelhof and Andrew Husby wrote to clients.

To be clear, AI is not the whole story in the cross-Atlantic divergence.

The US was outperforming Europe before the advent of OpenAI's ( OPAI.PVT ) ChatGPT in November 2022 and before the current capital expenditures boom. The US economy is more dynamic for reasons ranging from demographics and fiscal policy to far stronger capital markets, abundant and cheap domestic energy, and the world's most powerful and well-capitalized corporate sector.

Yet the capital expenditures boom and economic gains following the 2022 launch of ChatGPT have disproportionately accrued in the US market, flowing into US companies and investors. In other words, the AI investment boom didn't create the US advantage, but it is magnifying the US lead.

Global AI investments are expected to exceed $1 trillion this year, with expectations that the figure will grow to roughly $1.4 trillion in 2027, per research from Bank of America. Yet hardware investment, or actual construction of data centers and other AI infrastructure, remains concentrated in the US as the US and Canada account for roughly 60% of new data center capacity additions in 2026 compared to Europe's approximately 10% share, per Goldman Sachs.

Compared to Europe, the US is capturing a much larger share of the direct investment, corporate profits, and equity performance. Where the US hosts roughly three-quarters of global computing capacity, the eurozone hosts only 5%, per ECB data.

"European capital markets are smaller and more fragmented, bank-based financing can favour incumbents, and regulatory and market fragmentation can slow diffusion," Egelhof and Husby wrote. "Even in our most optimistic scenarios, the eurozone results fall short of the US."