AI IPOs, Inflation Risks, and Europe’s Value Case: Insights From the EMEA Q4 Market Outlook

Macroeconomic uncertainty is increasingly becoming the defining challenge for investors as higher energy prices, rising bond yields, geopolitical tensions, and shifting interest rate expectations test the resilience of global markets. At the same time, the rapid growth of artificial intelligence is creating new opportunities and risks, prompting investors to reassess how they think about valuations, growth, and portfolio positioning.

During our recent webinar, EMEA Q4 Market Outlook: Investing With a House of Cards Economy, Michael Field, Morningstar Chief Equity Market Strategist EMEA, and Malik Ahmed Khan, Senior Equity Analyst, joined Ollie Smith, Senior Editor, to discuss whether current market valuations reflect mounting macroeconomic risks, where advisors can still find value in European equities, and what investors should make of the upcoming Anthropic and OpenAI IPOs.

The audience Q&A highlighted many of the questions financial advisors are asking about AI investing, inflation, private markets, and opportunities across today's uneven market landscape.

A: Per Khan’s insight, the charge is largely an accounting adjustment rather than an indication of deteriorating business fundamentals. As Anthropic's valuation increased, previously granted equity awards became significantly more valuable, creating a substantial accounting expense.

Khan emphasized that Morningstar views the charge differently from an operating loss. As he explained, "it's a paper only loss" and "that's not actually an economic loss. It's not a representation of either cash flows exiting the business or a continuing charge."

Investors evaluating AI companies should focus on the underlying economics, revenue growth, profitability trends, and future cash generation rather than headline accounting figures alone.

A: Khan believes this is a compelling possibility. While European markets have had less direct exposure to the buildout of AI infrastructure than many US technology companies, they could still benefit meaningfully from productivity improvements and efficiency gains generated by AI adoption.

However, he cautioned the benefits are unlikely to be evenly distributed. In his view, "efficiencies using AI are going to be power law distributed," meaning a relatively small group of workers and organizations may capture a disproportionate share of the value.

Even so, Morningstar views generative AI as a meaningful change in how businesses operate, and companies that successfully integrate these tools could improve both productivity and profitability over time.

A: Field argued that while AI could eventually influence labor costs and productivity, it is unlikely to solve the inflation challenges currently facing central banks.

Today's inflation pressures are being driven more by energy markets and geopolitical developments than by labor shortages or excessive consumer demand. Field noted "what's feeding inflation at the moment" is the impact of the Strait of Hormuz and the Iran conflict on energy prices, which then affects broader areas of the economy. While AI may have disinflationary effects over the longer term, Morningstar's view is that these benefits are unlikely to materially alter the near-term inflation outlook.

A: Field suggested that, if anything, investors may still be underestimating the speed at which leading AI firms are growing.

Pointing to the revenue growth being reported by major AI companies, he observed that "the potential for AI is running ahead of what we thought it would be." Growth rates that appeared extraordinary just a year ago are already being surpassed. While it remains uncertain how much of that growth ultimately translates into sustainable customer adoption and long-term returns, the sector continues to exceed many prior expectations.

A: Khan highlighted several elements of the SpaceX IPO that could serve as useful examples. These include limiting the amount of stock available for trading initially, maintaining longer lock-up periods, and accelerating inclusion in major indexes to attract institutional capital.

More importantly, Khan believes Anthropic must persuade investors that its growth trajectory is sustainable. As Khan put it, attracting institutional support will require "convincing them that their growth is durable and is not just a fluke." For advisors evaluating AI investments, the durability of growth and economic moat will likely be more important than short-term enthusiasm surrounding the IPO itself.

A: Khan sees private credit as a necessary component of financing the massive infrastructure requirements associated with AI. The scale of investment needed for next-generation data centers and computing capacity is so large that multiple forms of capital are required.

In his view, investors across public and private markets are ultimately backing the same core thesis. As he explained, "private credit, public credit, private equity, public equity... they're underwriting the same risk," namely whether AI can deliver on the expectations currently embedded in valuations and infrastructure spending. Advisors should recognize that AI exposure increasingly extends beyond public technology stocks into private credit, private equity, and infrastructure-related investments.

A: Khan believes the filing could become one of the most important data points yet for assessing the AI investment landscape.

The prospectus is expected to provide insight into enterprise adoption, pricing dynamics, operating costs, customer concentration, and the durability of revenue growth. As Khan noted, the IPO will give investors "a first look on an actual AI lab and their financials" and help answer key questions around profitability, competitive advantages, and long-term value creation. The lessons learned from Anthropic's public debut could also shape expectations for OpenAI's eventual IPO.

Market volatility, inflation concerns, and geopolitical risks continue to shape the investment landscape, but the webinar discussion highlighted that opportunities remain across a wide range of sectors and asset classes.

At the same time, artificial intelligence is rapidly evolving from a technology theme into a force that could reshape company earnings, labor markets, capital allocation, and investment portfolios. These developments create both opportunities and challenges for advisors evaluating long-term portfolio positioning.

For advisors, the key lesson is to look beyond broad market narratives and assess where value, growth potential, and risk are most likely to emerge. Whether evaluating European equities, healthcare stocks, AI-related companies, or upcoming IPOs such as Anthropic and OpenAI, we encourage taking a disciplined approach to valuation, competitive advantages, and business fundamentals.

Tools like Morningstar Direct can help advisors analyze sector exposures, identify potential risks, and evaluate investment opportunities with greater consistency and confidence.