Global Market: European shares slip as AI chip rally fails to offset Middle East concerns

European shares edged lower on Wednesday as gains in technology stocks, driven by upbeat forecasts from semiconductor equipment maker ASML, were outweighed by investor caution over escalating tensions in the Middle East, according to Reuters.

The pan-European STOXX 600 index fell 0.1% to 641.07 points in early trading, with most sectors trading in negative territory as investors balanced encouraging corporate earnings against growing geopolitical risks.

Technology stocks outperformed, rising 1.4% after Dutch chip equipment giant ASML raised its financial forecasts for 2026, reinforcing confidence in continued demand for artificial intelligence-related semiconductor equipment. The company's optimistic outlook also lifted shares of chip-related firms ASM and Soitec, which climbed more than 2% each, as per a Reuters report.


The strong update from ASML helped ease recent concerns over whether the rapid AI-driven rally in semiconductor stocks could be sustained after significant gains during the second quarter. Investors had recently questioned whether lofty expectations surrounding AI investments were becoming difficult to justify.

However, software stocks remained under pressure as investors continued to rotate away from sectors viewed as potential laggards in the AI boom. Germany's benchmark index underperformed regional peers, falling nearly 1%, weighed down by a 2% decline in software giant SAP. French software firms Dassault Systemes and Capgemini also lost more than 1%.

Luxury stocks offered another bright spot for the market. Richemont, the owner of Cartier, surged 5.3% after reporting stronger-than-expected first-quarter results, supported by robust jewellery demand across Asia and the Americas, according to Reuters.

Despite pockets of strength in technology and luxury stocks, broader market sentiment remained cautious as investors assessed the impact of rising geopolitical tensions. Oil prices climbed to around $85 a barrel after tensions between Iran and the United States intensified, with Tehran shutting the strategically important Strait of Hormuz, raising concerns over global energy supplies and inflation.

Market participants are also closely monitoring the ongoing earnings season, with corporate guidance expected to provide further insight into how companies are navigating a volatile macroeconomic environment marked by geopolitical uncertainty and elevated commodity prices.