As AI trade tires, BCA calls for European stocks to beat Wall Street Jaiveer Shekhawat Sun, November 8, 2026 at 10:31 AM EST 3 min read ^IXIC +1.09% Investing.com -- Investors should shift exposure away from U.S. equities and into European stocks as growing doubts over the artificial intelligence investment boom and the prospect of falling energy prices reshape global market leadership, BCA Research said.
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The research firm believes Europe is positioned to outperform Wall Street as the forces that have weighed on its equity markets begin to reverse, with cheaper valuations, lower energy costs and less exposure to the AI trade offering potential advantages.
In a November 6 research note, BCA chief strategist Jeremie Peloso said concerns about the sustainability of AI capital expenditure and the returns from massive infrastructure investments were becoming increasingly difficult for investors to ignore. The Nasdaq's 6.4% plunge on Thursday underscored the growing uncertainty surrounding the technology-led rally.
While BCA does not expect an immediate collapse in the AI boom, it said recurring concerns over regulation, building permits, the sustainability of capital spending and the ability of companies to generate returns on their investments warrant a more cautious approach to U.S. equities.
The shift in sentiment could benefit European markets, which have struggled this year with elevated energy costs and competition from the U.S. technology sector. Despite those headwinds and geopolitical tensions surrounding Iran, European equities have broadly held their ground against U.S. stocks in local currency terms.
Falling energy prices could provide another source of support. BCA said lower oil and natural gas prices would ease pressure on European household purchasing power and corporate profit margins, potentially giving the region a disproportionate boost if energy markets normalize.
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The firm's geopolitical analysts assign a 30% probability to renewed escalation in the Iran conflict over the coming months, but its broader outlook points to gradual energy-price normalization through the first half of 2027.
Cheaper energy could also ease inflationary pressures across the eurozone and reduce the need for further monetary tightening by the European Central Bank. BCA noted that markets were pricing in roughly 50 basis points of ECB rate increases in 2027, expectations that could be challenged if energy prices decline.
The U.S. Federal Reserve, meanwhile, could face more persistent inflation pressures given stronger domestic economic activity, potentially creating a more favourable monetary policy backdrop for European equities relative to their U.S. counterparts.
BCA also highlighted the valuation advantage of European defensive sectors, many of which trade at substantial discounts to comparable U.S. stocks. It recommends investors favour defensive shares as they rotate exposure towards Europe.
However, the firm cautioned against interpreting its relative preference for European equities as an outright bullish call on stocks. Its bearish outlook for the eurozone economy heading into 2027 supports maintaining an overall underweight position in equities relative to government bonds.
BCA's central recommendation is to rotate from U.S. equities into European stocks, particularly defensive sectors, on the view that Europe can outperform Wall Street even if both markets decline.
As AI trade tires, BCA calls for European stocks to beat Wall Street
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