MW Key themes from AI adoption to protein demand are suddenly lining up for European stocks

By Jules Rimmer

Wall Street firm argues European stock markets can offer exposure to current global themes

Morgan Stanley sees strong inflows to Europe and believes some of the most pertinent investment themes at present play into the hands of European equity markets

European stocks are witnessing robust inflows at present and there's a convergence of themes that are helping them more than American equities.

EU equities are seeing rising diversification flows...

There is what Morgan Stanley refers to as a "thematically rich backdrop" to Europe and there are four key themes for investors to exploit: societal changes, geopolitical multipolarity, tech diffusion and shifts in energy dynamics required to power AI development.

Morgan Stanley's thematic approach to European stocks is laid out in a note published Thursday and authored by a team led by Paul Walsh, its head of research. In short, the note identifies an increasing number of European stocks that can be deployed to exploit global themes, often at the expense of their U.S. counterparts.

The societal changes identified by Morgan Stanley are headlined by a surprising magnitude of job losses resulting from the adoption of AI and also an emphasis on health with weight-loss drugs increasingly to the fore.

The team believes a structural adjustment in the job, resulting from agentic AI adoption, creates opportunities for companies especially those involved in reskilling. Stocks benefiting from this trend include Adecco (CH:ADEN) and TAL Education (TAL) whereas recruitment and IT services plays like Randstad (NL:RAND), Hays Group (UK:HAS) , Capgemini (FR:CAP) and Page Group (UK:PAGE) are rated underweight as employers hire fewer staff.

Morgan Stanley notes that valuations in software IT and internet and media business sub-sectors have corrected 40% from their 2025 highs. Walsh's team sees most upside in future for credit bureaus, classified ads, music label and software, which throws up opportunities in the likes of SAP SE (SAP) Universal Music Group (NL:UMG) and Experian Plc (UK:EXPN).

The firm recommends exposure to where the bottlenecks exist in AI development, like for memory chips, creating pricing power for the likes of ASML $(ASML)$, ASM (NL:ASM).

The power demands made by hyperscalers and data centers will improve the growth prospects of many utilities and Morgan Stanley regards RWE (XE:RWE), Centrica (UK:CNA), Engie (FR:ENGI) and Drax (UK:DRX). European utilities offer lower valuations than their American counterparts, investor positioning is much lighter and affordability concerns in the U.S. - with pushback on price increases - may lead to regulatory/ pricing pressure especially as U.S. midterm elections approach.

Changes in how society approaches its overall health leads Morgan Stanley to expect U.S. protein consumption to rise by 5% over the coming years and so the stocks they see exploiting this trend are ingredients and packaging companies with exposure to high-protein categories like Danone (FR:BN), Glanbia (UK:GLB) and Novonesis (DK:NSIS.B). "Protein is entering the mainstream," the report advises.

-Jules Rimmer

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

February 13, 2026 06:53 ET (11:53 GMT)

Copyright (c) 2026 Dow Jones & Company, Inc.