European shares fall as global AI rout gathers pace

European shares fell on Friday, with losses across the board as a global market rout gathered steam, capping a painful week as investors grappled with uncertainty over AI stocks after ‌Democrats took control of the US Congress. The pan-European STOXX 600 index dropped 1% to 648.83 points by 0919 GMT, with benchmarks in most major regional markets trading lower. Friday's losses wiped out STOXX's gains for the week, and it was down about 0.3%.

Fears that a Democrat-led Congress could seek curbs ‌on AI data-centre spending added to concerns over weak returns, lofty valuations and debt-fueled investment. "The AI build out is responsible for quite a chunk ‌of US growth, not just in terms of the construction, the manufacturing, the components needed, but also the fact that valuations have shot so high that it's actually added to wealth perceptions of Americans," said Susannah Streeter, chief investment strategist at Wealth Club.

"If you start to see stock portfolios hit, that is going to act as a real drag on consumer sentiment," ⁠Streeter said, ​adding that she expects market volatility to ⁠persist till at least January when there could be more clarity on the Democrats' approach to AI policy. Tech stocks struggled to make a comeback after dropping earlier on Friday.

Siltronic edged up ⁠1% and ASMI climbed 2.7% in choppy trading, while AI equipment makers Siemens Energy gained 2.3% and Schneider Electric was marginally higher. Despite the selloff, the STOXX 600 index ​was relatively less impacted this week than its Asian and Wall Street peers, given the European index's smaller exposure to AI stocks.

Media, healthcare ⁠and personal & household goods led declines, falling over 2% each and reflecting that traditional safe-haven sectors were not immune to the panic in equity markets. On the earnings front, Teleperformance tanked 18% after cutting ⁠its ​full-year revenue growth outlook after weakness in the outsourcing firm's trust and safety business more than offset growth in its AI-powered and back-office services.

In bright spots were clean energy stocks, buoyed by expectations that a Democratic win in the US earlier this week could ease the scrutiny around the ⁠group and strong earnings. Orsted and Nordex rose 2.7% and 1.7%, respectively. EDP added 1.6% after raising its full-year recurring net profit guidance for the third ⁠time this year.

Airlines also gained on expectations ⁠that the recent loss to President Donald Trump's Republican party could accelerate efforts to end the Middle East conflict. British Airways owner IAG rose 2%, despite forecasting its annual capacity would be slightly lower this year. Lufthansa and Air ‌France KLM were up 2.4% ‌and 5%, respectively.