Citi Analyst: Europe Is an Undervalued AI Bet as Investment Logic Shifts

Citigroup analyst Elise Badoy argues that as market logic changes, European companies are becoming undervalued bets on AI. The focus is shifting from infrastructure to practical adoption, and that opens up new opportunities in Europe in particular.

The phase shift: from infrastructure to adoption

For the past two years, the AI market has been defined by an infrastructure race. Investors backed the builders: data centers, chips, computing capacity. That logic made Nvidia the world's most valuable company and pushed the market capitalizations of Microsoft, Amazon and Google to new highs.

The US dominated this race, and the market priced that in long ago. American tech companies trade with a large AI premium already built into their multiples. Europe, historically more conservative, with fewer tech giants and heavier regulatory pressure, has not yet received such a re-rating.

Why Europe looks attractive now

According to Badoy of Citigroup, investors are starting to reorient. The market is no longer looking for infrastructure builders, but for companies that show real returns from AI adoption: lower costs, higher margins, automated operations. This is where European companies, including industrial groups, financial institutions and 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 adopting AI in business processes, but the market has not yet given them an AI premium for it
• Europe's industrial and financial sectors are primary beneficiaries of operational AI
• The EU AI Act provides regulatory certainty, which reduces compliance risk for institutional investors
• The traditional valuation gap between US and EU tech has historically narrowed as technology matures
• A lower entry point with comparable potential for productivity growth

Risks to this view

Badoy's thesis is not beyond dispute. Europe has historically been slower to adopt technology at the corporate level, and bureaucracy, caution and regulatory uncertainty during the transition period have not gone away. Moreover, adopting AI does not automatically mean profiting from AI: many organizations are still investing in transformation without yet seeing measurable returns.

"The focus is shifting from infrastructure to implementation, and that makes

European markets more attractive for AI bets," said Elise Badoy, Citigroup.

For investors, this means rethinking the structure of an AI portfolio: alongside American hyperscalers and semiconductor companies, it is worth considering European corporate players where AI automation already works but the market has not yet priced it in.

What this means

If Citigroup's view is right, the window of undervaluation for European AI assets is narrowing. Investors positioning for the next phase of the cycle, real adoption rather than infrastructure hype, may find better entry points in Europe than in already overheated American stocks.