• PE and corporates make hay in second best YTD in a decade
• Europe provides hedge against hyperscaler margin compression
• Iran resolution, if it comes, may benefit European stocks most

European accelerated sell-downs volumes have soared in 2026 as investors seek value and diversification away from US AI concentration.

While equities this side of the pond have underperformed their US counterparts since the start of 2Q, such levels represent an attractive entry point for many investors.

This quarter has seen a trend reversal versus previous months. In 4Q25 through to the first quarter of 2026, European stocks outperformed their US counterparts as fears began to grow over the huge scale of AI capex needs; the Stoxx 600 hit a record high in 1Q26.

As we enter June, the Stoxx 600 is up around 4.98% YTD but US stocks have reasserted their dominance, mostly driven by regained swagger from technology stocks, best exemplified by a 19% gain in the NASDAQ 100 over the same period.

The European benchmark is trading at a forward P/E ratio of around 15x vs a forward ratio of vs around 24x for the NASDAQ 100, according to public data.

This represents a discount of roughly 37.5% to the tech-dominated NASDAQ 100 index, leaving plenty of room for performance growth.

For investors seeking a diversification away from mega-cap US tech, this could be an enticing jumping-on point.

“From an equities perspective, the US has been a far better play,” noted an investor. However, “that differential has increased significantly at a pace that is not supported by what we are seeing in earnings, where European corporates are not lagging too far behind the US. So from a valuation gap perspective, Europe is starting to look compelling.”

The investor noted – and ECM Pulse agrees – the momentum behind US tech is difficult to argue against. In a bull market, the sheer size and liquidity of the US capital markets and the dominance of its industrial champions at a global scale control the board.

However, there are several structural equity trends in Europe that give investors a chance to see real returns and a series of recent accelerated transactions has taken advantage of these pockets of demand.

ECM boost

Lower liquidity in European equities means that block trades are often the best way for investors to take large positions in European stocks, and this has been apparent in 2026.

Accelerated sell-downs in Europe are at USD 48.3bn YTD, the second-best start to a year in the last decade, just behind 2021.

Source: Dealogic

This demand has created huge liquidity opportunities for sellers.

On 26 May, CVC sold down a EUR 3bn slice of Spanish energy business Naturgy, the second multi-billion trade in the name in 2026 following on from BlackRock’s exit from the stock in March.

The Naturgy sell-down in May was the seventh billion-dollar plus accelerated sell-down in Europe so far this year – a list that includes mammoth sponsor monetizations such as EQT’s CHF 4.9bn exit of Galderma in March.

There have also been several mega-corporate primary raises to tempt investors, including United Utilities’ GBP 800m April capital raise, alongside M&A financing transactions from France’s Engie, UK-listed Rosebank Industries or Swiss insurer Zurich’s accelerated placement to finance its purchase of Beazley.

“The European accelerated market has been a huge success for both buyers and sellers, which has proved somewhat of a virtuous circle in that the success of previous large deals have led to more trades,” said an ECM banker. “The CVC exit of Naturgy adds to a long list of huge European exits that includes Galderma, as well as Haleon and LSEG in previous years.

“The European market continues to be phenomenal at providing liquidity in size.”

Hyperscaler hedge

Part of the rationale behind the relative outperformance of European equities versus US stocks at the end of 4Q and beginning of 1Q26 was that European equity provided a level of investment protection against US market exposure to AI and large-listed hyperscalers.

While European stocks are not insulated from the disruptive impacts of AI, nor roped off from the possible productivity gains from deploying it, they are less exposed to the tight economic realities of US hyperscalers.

With US benchmarks and several of these trillion-dollar behemoths close to record highs, American markets once again looked priced to perfection at a time when the fundamental economics behind many of these stocks is set to change.

The Mag 7, once the leaders in listed cash generation, are embarking on huge capital expenditure in the race for AI dominance. This will put more pressure on their margins than perhaps at any point since their public market debuts.

Future equity growth will be dependent on them maintaining their exceptional revenue growth in the quarters ahead, seemingly not an issue after a strong 1Q26.

But it remains a delicate balance.

In April, it emerged that Uber – one of the most enthusiastic adopters of artificial intelligence in corporate America – had burnt through its entire 2026 AI budget in just four months. Moreover, COO Andrew Macdonald last month revealed the ridesharing player was failing to draw a clear line from AI investments to improvements in its customer offering.

The token model of many AI providers, such as Anthropic or OpenAI remains hugely expensive for corporate clients and will likely continue to be so, at least from the hyperscalers.

As this news service’s Continental Drift column has argued, CFOs managing inflation-related margin impacts will demand clearer ROI from AI token usage, potentially trimming pioneers’ revenue growth.

Attempting get ahead of this, Open AI’s CEO Sam Altman in March predicted a utility-like future for artificial intelligence, but where the provision of intelligence is “too cheap to meter”.

Stick with us on the build-out, it’ll get less expensive – that seems to be the pitch.

However, anyone familiar with the utilities sector knows that the cheapest rate tends to win the most customers. And in an ever-more competitive world of artificial intelligence, there are likely to be plenty of providers offering services that are perfectly adequate for most corporate clients at a fraction of the cost of premium providers, such as the Mag 7 hyperscalers.

Then the focus on ROI will not be on the corporate clients, but the capex-hungry hyperscalers themselves.

Also, utilities trade at far lower multiples than growth tech, something OpenAI investors might want to consider when examining the prospect of an IPO of the AI behemoth later in 2026.

None of this is a clarion call to short US tech, or indeed a guarantee that we are heading for a long-predicted AI bubble-burst.

But if some air does come out of the AI tyres just as inflation dents corporate margins and the US consumer feels the pinch, a stateside correction could narrow the valuation gap with European stocks.

And while a resolution to the Iran crisis may feel remote this morning (1 June), amid reports of fresh strikes on Kuwait, Europe’s greater exposure to energy import price hikes means valuation benefits may be stronger this side of the pond than in the US when a settlement does emerge.

If investors want a diversification play, buying European equities now at a discounted valuation to US stocks might not be the worst idea in the world.

The more investors that think that way, the better the environment will be for continued European block activity.