European shares hit a record high on Friday, powered by improving investor appetite for tech shares globally, while corporate earnings buoyed markets through a week of central bank decisions and Middle East hostilities.
The pan-European STOXX 600 index (.STOXX) was up 0.9% at 655.45 by 0836 GMT, on track for its fourth month of gains.
Tech stocks on the STOXX 600 (.SX8P) jumped 1.7%, tracking gains in Asian rivals. South Korean shares (.KS11) soared 16% on a renewed surge of investment into semiconductor stocks.
On Friday, Soitec (SOIT.PA) added 7%, Infineon Technologies (IFXGn.DE) was up 5.8% and ASML (ASML.AS) inched 2.7% higher. Aixtron (AIXGn.DE) topped the STOXX 600 with a 9% jump.
This week, quarterly earnings from U.S. Big Tech painted a mixed picture as Microsoft surged after signs its AI investments were paying off, while Meta was punished as its free cash flow saw a drop due to its spending plans.
Concerns over hefty spending on AI buildouts and their returns not materializing at the pace markets expected have raised scrutiny of valuations in the sector, leaving it vulnerable to wild swings.
UBS analysts said in a note they estimate operating cash flow at hyperscalers will be overtaken by their cash capex, raising the risk of AI spending in 2028 coming in below 2027 levels - a negative for semiconductors.
"We remain constructive on the AI growth story, but believe investors should manage concentration risk by broadening their exposure to defensive tech stocks," they said.
On the STOXX 600, miners (.SXPP) were the biggest percentage gainers, up 1.9% tracking prices of copper.
Meanwhile, earnings were in full swing in Europe. Teleperformance (TEPRF.PA) jumped 7.4% after the outsourcing firm confirmed its 2026 targets, which lifted the industrial goods and services sector (.SXNP) 1.6%.
Universal Music Group (UMG.AS) slumped 22.7%, set for its biggest one-day loss since July 2024, after its first-half results. The STOXX 600 media index (.SXMP) lost 4.6%.
This week, U.S. Federal Reserve chief Kevin Warsh said policymakers were committed to bringing inflation down, after a divided central bank left interest rates on hold, leaving markets with little clarity on the next likely move.
Hostilities in the Middle East also escalated, with Brent crude topping $90 a barrel earlier in the week. However, robust corporate earnings helped offset the impact from these, setting the STOXX 600 up for a weekly and monthly gain.
Among others, Puma's (PUMG.DE) shares fell about 6% as investors were disappointed that it did not upgrade its outlook following a narrower-than-expected second-quarter operating loss.
Credit Agricole (CAGR.PA) gained 3.4% after posting better-than-expected second-quarter earnings.
IG Group (IGG.L) dropped 8.9% after it agreed to acquire U.S. daily fantasy sports and prediction markets operator Underdog for up to $1.3 billion.
