European shares slipped 0.1% to 641.07 points on Wednesday, even as Dutch chip-equipment maker ASML lifted its 2026 revenue outlook. The optimism for AI-driven hardware could not drown out growing worries about Middle-East instability.

ASML’s upgraded forecast fuels a short-term tech bounce

When ASML announced higher 2026 targets, investors snapped up the news, betting that demand for AI chips will stay strong. The technology segment of the pan-European STOXX 600 jumped 1.4%, and fellow semiconductor suppliers—ASM and Soitec—each rose more than 2%.

The upgrade reacts to a surge in AI workloads that need ever-more sophisticated lithography equipment. After a massive Q2 rally, some wondered whether the AI chip boom had peaked; the revised outlook reassured them that growth remains alive.

Geopolitical risk drags the broader market down

The tech lift wasn’t enough to keep the index in the black. Tensions flared after Tehran reportedly closed the Strait of Hormuz, a chokepoint that moves a sizable share of the world’s oil. Oil futures surged toward $85 a barrel.

Higher oil prices pose a dual threat: possible supply disruptions and renewed inflation pressure, both of which could complicate central-bank policy. Those headwinds outweighed semiconductor optimism and nudged the STOXX 600 lower.

Divergent sector performance

The market split sharply. Hardware stocks rallied, while software firms sold off. Germany’s benchmark index fell almost 1%, pulled down by a 2% slide in SAP, the country’s software heavyweight. In France, software leaders such as Dassault Systèmes and Capgemini each lost more than 1% as investors rotated out of companies seen as lagging the AI cycle.

Luxury goods bucked the trend. Richemont, the parent of Cartier, jumped 5.3% after first-quarter earnings beat expectations, driven by strong demand for high-end jewellery in Asian and American markets. The move shows premium consumer spending can stay robust even when sentiment is shaky.

Stakes for investors and companies

  • AI hardware confidence: ASML’s upgraded forecast backs the view that AI chip demand will keep growing, prompting capital flows to equipment makers and their supply-chain peers.
  • Risk premium on energy: The Strait of Hormuz closure raises the odds of supply shocks, pushing oil higher and stoking inflation concerns.
  • Sector rotation: Hardware gains and software losses highlight a clear split in market performance.

Takeaway: ASML’s brighter 2026 outlook revives confidence in AI hardware, but Middle-East tensions lift oil prices and keep inflation fears alive, creating a stark divide between winners in chips and luxury goods and losers in software and broader indices.