Europe trails AI chip surge as UK market finds lifeline in takeovers
A global rush into the physical infrastructure of artificial intelligence has driven a stark divide in the first half of 2026, leaving European indices trailing their Asian and American peers while a wave of takeover bids props up UK valuations.
The first six months of 2026 have fundamentally reordered global markets, rewarding investors who backed the physical build-out of artificial intelligence and punishing those who sought safety in traditional havens. Amid a backdrop of Middle Eastern conflict, political upheaval and an oil-price spike, stock markets still pushed to fresh record highs.
The defining trade was unglamorous memory chips, which surged as tight supply collided with soaring demand from expanding data centres. SanDisk led the US market with an 850% gain, while Western Digital, Micron Technology and Seagate Technology all more than tripled. Other US equities like Intel, Dell, AMD and Applied Materials rose between 150% and 280%. The rally spilled into emerging markets, doubling South Korea's KOSPI and pushing Japan's Nikkei 225 up 40%.
By contrast, Europe's major indices posted single-digit gains, lacking the heavyweight chipmakers that drove Asian and American returns. The FTSE 100 rose 7%, the CAC 40 added 5% and the DAX managed just 2%.
Without its own memory giants, Europe relied on corporate activity to drive returns, particularly in London. Six FTSE 100 companies, including Glencore, Schroders and Segro, attracted bid interest in the first half. This wave of takeovers signalled that buyers still see value in British blue chips even after a three-year re-rating.
The AI boom was not entirely kind to the continent's established firms. Tech-adjacent shares like Experian and RELX were swept up in fears about AI disruption. Housebuilders such as Persimmon also struggled against a sluggish property market.
Meanwhile, a defence trade that stormed through 2025 conspicuously cooled. European champions like BAE Systems and Germany's Rheinmetall gave ground as investors decided that rising military budgets were already fully priced in.
The broader market rotation caught several high-profile names off guard. Previous AI leaders Meta and Microsoft fell 14% and 24% respectively, with Microsoft now trading at its cheapest level in a decade. Heavy infrastructure spending turned these tech giants into capital-hungry businesses, leaving both valued more modestly than McDonald's.
Traditional safe havens suffered as higher bond and cash yields offered income that static assets cannot. Gold surged to a record $5,594.82 an ounce on 29 January before losing roughly 28% from that peak, while Bitcoin dropped 28% since January. "Companies on the receiving end of the AI spending boom were the standout investments of the first half," said Dan Coatsworth, head of markets at AJ Bell, while Bitcoin proved "a shocker" and gold "lost its shine."
However, the dynamic is already shifting. The memory rally has begun to unwind in recent days, catching several of the same high-flying names in a sharp technology sell-off.
