AI and Defense Spending Drive Industrial Earnings Surge in Europe

Europe's industrial sector is poised to outpace all others this earnings season, fueled by accelerating investments in artificial intelligence infrastructure and defense spending. The MSCI Europe Industrials Index projects 4.9% EPS growth for Q3—outperforming technology (4.2%) and communication services (3.3%).

Capital goods stand as the clear winner with 15% anticipated EPS growth, nearly half attributed to electrification leaders Siemens Energy AG, ABB Ltd., and Prysmian SpA. "Electrification is the direct beneficiary of AI's data center expansion," notes Bloomberg Intelligence strategist Laurent Douillet. "With AI spending projected to accelerate in 2024, this momentum appears sustainable."

ABB's collaboration with Nvidia on next-gen AI data centers exemplifies the sector's strategic positioning. Prysmian's recent price target upgrade by UBS underscores the market's recognition of cable manufacturers' critical role in powering AI infrastructure.