A recent cautionary statement from Alibaba has sent shockwaves across European markets, dampening investor enthusiasm for stocks linked to artificial intelligence. Joe Tsai, Vice Chairman of the Chinese tech giant, warned of a looming “bubble” in AI-related infrastructure expansion, specifically pointing to the overcapacity being developed in anticipation of demand that may not fully materialize.
While Germany’s DAX index edged up 0.7% at the start of the week, Siemens Energy emerged as one of the biggest losers in the blue-chip index, slipping 0.9% to just over 60 euros. At one point during the day, the stock had dropped by more than 4%, falling short of its February high and moving closer to its 21- and 50-day moving averages.
Siemens Energy has gained attention from investors as a potential AI play, thanks to the surging electricity demand driven by data centers. Any hint of instability in AI infrastructure investments now causes sharp reactions. The stock had seen a remarkable rally in recent months, rising nearly tenfold from its all-time low of €6.40 in September 2023 to a February peak. This meteoric rise had been largely fueled by the AI boom, making any negative sentiment particularly impactful.
Tsai’s comments, made during an investor conference, highlighted a broader concern: major tech firms worldwide—including Microsoft, SoftBank, and Alibaba—are committing billions to AI infrastructure without fully understanding customer demand. He emphasized that many of these projects are moving forward without clearly defined use cases, creating a disconnect between investment and real-world application.
This perspective resonated across markets, with investors reassessing the risks tied to aggressive AI-related investments. Tsai’s remarks, especially his reference to global data center expansion, were seen as a red flag for companies like Siemens Energy that had benefited from AI-driven optimism. HOCHTIEF, the construction firm known for building data centers, also saw its shares come under pressure. The stock, which had gained 28% year-to-date and is listed on the MDAX, fell 1.1% on Tuesday, struggling to stay above its 21-day moving average.
Adding to the mix, Siemens Energy is reportedly nearing the sale of a significant portion of its wind energy operations in India. Although investors generally welcomed the potential move, it wasn’t enough to lift the company’s stock into positive territory. “The idea isn’t new, but it’s becoming more concrete,” said one market participant. Still, analysts believe it’s too early to fully assess the implications, with more details expected in the coming weeks.