Citi analyst: Europe is an undervalued AI play amid a shift in investment logic

Citigroup analyst Élise Badoy believes: as market logic changes, European companies are becoming undervalued bets on AI. The focus shifts from infrastructure to practical implementation — and this opens new opportunities specifically in Europe.

Phase Shift: From Infrastructure to Implementation

For the past two years, the AI market has been dominated by an infrastructure race. Investors were betting on those building: data centers, chips, computing power. This logic elevated Nvidia to the status of the world's most expensive company and drove market caps of Microsoft, Amazon, and Google to new highs. The US dominated this race, and the market had long reflected this in prices. American tech companies trade with a massive AI premium already baked into their valuations. Europe — historically more conservative, with fewer technology giants and greater regulatory pressure — has not yet received such a revaluation.

Why It's Profitable to Look at Europe Now

According to Badoy from Citigroup, investors are beginning to reorient. The market is no longer seeking infrastructure builders, but those demonstrating real returns from AI implementation: cost reduction, margin growth, operations automation. This is where European companies — industrial groups, financial institutions, logistics operators — are starting to show results, while remaining cheaper than their American counterparts. Several factors make the European market attractive right now:

• European companies are actively implementing AI in business processes, but the market has not yet given them an AI premium for this
• Europe's industrial and financial sectors are primary beneficiaries of operational AI
• The EU AI Act creates regulatory certainty, reducing compliance risks for institutional investors
• The traditional valuation gap between US and EU tech historically narrows as technology matures
• Lower entry point with comparable productivity growth potential

Risks of This View

Badoy's thesis is not without controversy. Europe indeed historically adopts technologies more slowly at the corporate level — bureaucracy, caution, and regulatory uncertainty at the transitional stage remain. Moreover, AI implementation does not automatically equal AI profitability: many organizations are still investing in transformation without yet receiving measurable returns.

"The focus shifts from infrastructure to implementation, and this makes

European markets more attractive for AI bets," — Élise Badoy, Citigroup.

For investors, this means a revision of the AI portfolio structure: alongside American hyperscalers and semiconductor companies, European corporate players should be considered, where AI automation already works but is not yet valued by the market.

What This Means

If Citigroup's view is correct, the window of undervaluation for European AI assets is narrowing. Investors oriented toward the next phase of the cycle — real implementation rather than infrastructure hype — may find more advantageous entry points in Europe than in already overheated American securities.