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Powerful New AI Models Rattle European AI Adopter Stocks

Author

samour ankit
August 15, 2025

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European companies that have embraced artificial intelligence are facing a sharp market sell-off, as the release of increasingly powerful AI models raises concerns that entire sectors—from software to data analytics—could be overtaken by the technology.

The slide began earlier this week when shares in German software giant SAP and French engineering software firm Dassault Systèmes tumbled, following fears that AI could disrupt their business models. A day earlier, U.S. broker Melius Research downgraded Adobe, sparking further jitters.

Since mid-July:

  • London Stock Exchange Group (LSEG) shares have fallen 14.4%

  • Sage Group (UK software) is down 10.8%

  • Capgemini (French IT consultancy) is off 12.3%

These firms—labelled “AI adopters” by analysts—have invested heavily to integrate AI into their products and services. Until now, they were a popular way for European investors to gain AI exposure, given the scarcity of pure AI developers in the region.

The Trigger: Next-Gen AI Tools

Two major product launches have shaken investor confidence:

  • OpenAI’s GPT-5, unveiled last week, a significant leap in generative AI capability.

  • Anthropic’s Claude for Financial Services, released July 15, which directly challenges the financial data business of LSEG.

Kunal Kothari, fund manager at Aviva Investors, said:

“With every new iteration of GPT or Claude, the jump in capability is so large that it can undermine entire business models.”

Broader Markets Stay Strong

While AI adopters are suffering, the FTSE 100 has risen 2.5% and the STOXX 600 is up 0.6% since mid-July. In contrast, U.S. indexes are at record highs, powered by big tech gains.

High valuations are adding pressure. The STOXX 600’s average price-to-earnings ratio is 17, while SAP trades at around 45—making it especially vulnerable to bad news.

Will AI Really “Eat Software”?

The turmoil has revived Nvidia CEO Jensen Huang’s 2017 prediction that “AI is going to eat software.”
Analysts say not all software companies face equal risk:

  • Firms with deep integration into client workflows and unique, hard-to-replicate data may retain strong competitive moats.

  • Enterprise-grade applications, mission-critical to operations, are less exposed due to the difficulty and risk of replacement.

Kothari points to Experian and Sage as examples, but warns that proprietary data alone may no longer be enough:

“I just don’t think data is a big enough moat anymore.”

A Buying Opportunity?

Some investors, like UBS O’Connor’s CIO Bernie Ahkong, see potential bargains emerging:

“Certain affected companies could actually use AI as a tailwind for earnings—but they will have to prove it, and that will take time.”

With AI advancing at unprecedented speed, the race is now on for Europe’s AI adopters to demonstrate that they can harness the technology—before it overtakes them.