Reuters: European companies’ AI investments need to start showing returns by 2025 as investors lose patience

European companies that have invested heavily in generative AI must start showing returns next year or investors may lose patience, Reuters reported. In recent weeks, as recession fears grow, stocks related to generative AI have fallen along with the overall stock market . The pressure on the industry has increased since the launch of DeepSeek in January, which triggered a sell-off in technology stocks.

Among hardware makers, chip equipment makers ASML and Best Semiconductor have seen their share prices fall 25% and 20%, respectively, since Jan. 24. French Schneider Electric, which supplies electrical equipment for data centers, has seen its share price fall 14%.

Meanwhile, among companies that use artificial intelligence, data group LSE Group fell 5.5%, while RELX fell 1.6%. German business software group SAP fell 2.9%.

An internal survey of more than 100 analysts published by Fidelity in January showed that nearly 72% expected artificial intelligence to have no impact on the profitability of the companies they follow by 2025 .

More Fidelity analysts surveyed believe AI will have a positive impact in the next five years. However, several European portfolio managers told Reuters their investment time frame is shorter than five years .

“Unless you start to see some returns on your investments eventually, the market is going to lose patience with the unbridled investments in AI ,” said Steve Rayford, lead portfolio manager for the global thematic equity team at Legg Mason Asset Management.

Rayford said that if companies adopting artificial intelligence don't have much to show for it in 2025, the market may tolerate it because they may be doing beta testing and experiments that year, but by 2026, investors need to start seeing a significant impact on these companies' revenues .

Valuations of AI-related stocks are relatively high . According to data from the London Stock Exchange Group, the average price-to-earnings ratio of the Stoxx 600 index is 17 times, while AI application companies like SAP have a price-to-earnings ratio of more than 90 times.

Bernie Akon, chief investment officer at UBS O'Connor hedge funds, said investors will start to question the price-to-earnings ratios of some companies if they still haven't achieved results by the end of 2025 .

“Throughout the year, management can always make excuses and say don’t worry, it will come to fruition in the next quarter… That’s often the case for a multi-year theme,” he said. “But by the fourth quarter, if it hasn’t come to fruition, then… people are not going to be patient anymore .”