AI and defense spending lead industrial surge

Source Cryptopolitan

The European industrial sector is outperforming all other sectors this third quarter due to the overwhelming increase in demand for electrification. 

According to Bloomberg Intelligence data, the MSCI Europe Industrials Index is expected to deliver 4.9% earnings-per-share (EPS) growth for the third quarter. By comparison, technology is forecast at 4.2% EPS growth, while communication services follow at 3.3%.

Companies involved in electrification have been the biggest beneficiaries of the boost in sales and revenue linked to the increase in AI adoption and the development of data centers.

AI and defense spending lead industrial surge

Europe’s industrial firms are set to outperform all other sectors this earnings season, due to an increase in investments in artificial intelligence infrastructure and defense spending.

The capital goods segment is projected to have 15% EPS growth for the quarter. Strategist Kaidi Meng says that about half of that growth is due to Siemens Energy AG, ABB Ltd., and Prysmian SpA. These companies are leveraging the growing demand for electrification.

“Electrification is a derivative of the AI spending and rollout of data centers,” Bloomberg Intelligence strategist, Laurent Douillet, said. He added, “Given the market view that AI spending will grow even bigger next year, this segment continues to do well.”

ABB, the leader of the automation market in Germany, has been collaborating with Nvidia Corp. to develop next-generation AI data centers.

Prysmian, an Italian cable manufacturer, recently saw its price target raised by UBS Group AG due to its exposure to U.S. data center expansion. Citigroup analyst Vivek Midha also expects Prysmian to announce a guidance upgrade and called the products responsible for the company’s growth “durable.”

Siemens Energy is benefiting from what analysts describe as “unprecedented order momentum and solid execution.” Bloomberg Intelligence analysts Omid Vaziri and Pauline Eschbach predict that the firm could raise its mid-term targets at its fiscal fourth-quarter results in November due to a stronger-than-expected demand for gas turbines and grid technologies.

Manufacturers such as Rheinmetall AG, Thales SA, and Leonardo SpA are expected to report strong figures for the fiscal year, boosted by increased defense spending.

Europe’s industrial market shows resilience

Analysts have raised estimates for European industrial and financial companies, but they’ve lowered expectations for the overall Stoxx Europe 600 index.

According to Douillet, the industrial sector’s outperformance could continue until 2026 if investments into electrification and defense remain strong. Recent data shows that the MSCI Europe Industrials Index has outperformed the overall MSCI Europe Index since October 2024.

“The impact of major infrastructure investments in Germany, combined with lower interest rates benefiting construction, will likely provide an additional boost,” he said.

Germany’s industrial production fell 4.3% in August from the previous month. Companies such as SKF AB, Atlas Copco AB, and Siemens AG may feel the impact in their automotive and industrial technology divisions.

The ongoing U.S.-China tariff dispute could also hurt demand and pricing for European manufacturers. Douillet warned that many firms may have rushed to ship and sell more of their products earlier in the year to get ahead of potential tariffs, which creates uncertainty about sales and shipments in the second half of the year.

An escalation in trade hostilities could reduce Chinese demand for European industrial products while boosting the competitiveness of domestic Chinese firms.

“If China retaliates, it could further erode European market share,” Douillet cautioned.

Swedish industrial companies are also facing issues due to the strong krona and a weak U.S. dollar, as that could affect export revenues and profit margins.

Claim your free seat in an exclusive crypto trading community - limited to 1,000 members.

Disclaimer: For information purposes only. Past performance is not indicative of future results.
placeholder
Samsung Electronics Forecasts Stronger-Than-Expected Q3 Profit on AI Demand Samsung forecasts Q3 profit of 12.1 trillion won, boosted by strong AI chip demand.
Author  Mitrade
Yesterday 01: 43
Samsung forecasts Q3 profit of 12.1 trillion won, boosted by strong AI chip demand.
placeholder
Dollar Gains as US-China Trade Tensions Ease The U.S. dollar remained steady on Tuesday following a shift in President Donald Trump’s harsh stance on tariffs against China.
Author  Mitrade
Yesterday 01: 38
The U.S. dollar remained steady on Tuesday following a shift in President Donald Trump’s harsh stance on tariffs against China.
placeholder
Asian Stocks Mixed as Commodities Pause and Yen Draws AttentionAsian equity markets struggled to close the week on a weak note Friday, influenced by ongoing losses on Wall Street that extended into early Asian trading.
Author  Mitrade
Oct 10, Fri
Asian equity markets struggled to close the week on a weak note Friday, influenced by ongoing losses on Wall Street that extended into early Asian trading.
placeholder
Oil Prices Hold Steady Amid Gaza Ceasefire and US Sanctions Oil prices held steady in early Asian trading on Friday following the announcement of a ceasefire between Israel and Hamas.
Author  Mitrade
Oct 10, Fri
Oil prices held steady in early Asian trading on Friday following the announcement of a ceasefire between Israel and Hamas.
placeholder
Bitcoin drops below $110K ahead of $22B options expiry; altcoins tumbleBitcoin fell below the $110,000 mark on Friday, heading for a steep weekly loss as nearly $22 billion in cryptocurrency options were set to expire. The drop also comes as traders await key U.S. inflation data that could influence the Federal Reserve’s policy outlook.
Author  Mitrade
Sept 26, Fri
Bitcoin fell below the $110,000 mark on Friday, heading for a steep weekly loss as nearly $22 billion in cryptocurrency options were set to expire. The drop also comes as traders await key U.S. inflation data that could influence the Federal Reserve’s policy outlook.
goTop
quote