While the artificial intelligence boom has continued to gather momentum in the United States and China, Europe's strengthening role in AI markets may be undervalued by investors, opening the door to fresh investment opportunities in the new year.



In recent years, AI's share of total European venture capital has grown to 27% as the world continues to wake up to the continent's strong range of artificial intelligence talent. 



According to a recent report, the past five years have seen the United States allocate 34% of its €1.33 trillion in VC funding to AI, while Europe lags with an average allocation of 18% of its €252 billion. 



While this data signifies a shortfall in artificial intelligence funding since 2020 in comparison to their US peers, it also highlights the vast potential that small-cap European AI stocks hold as growth opportunities for investors. 



As concerns grow over the scale of what some experts are suggesting may be an AI bubble on Wall Street, the calmer valuations and price-to-earnings (P/E) ratios in the EU could offer greater levels of resilience if the world's largest artificial intelligence players begin to struggle to match up to their high levels of investor interest. 



For investors looking to diversify their portfolios away from high AI valuations in the United States, small-cap European stocks could offer all the familiar growth opportunities that the artificial landscape holds, while retaining more resilience should their large-cap counterparts struggle to sustain their high ROIs. 



With this in mind, let's explore five small-cap European AI stocks that are worth tracking in the first quarter of 2026:



<h2>1. BE Semiconductor Industries (AMS: BESI) </h2>



Headquartered in the Netherlands, BE Semiconductor Industries (OTC:BESIY) (OTC:BESVF) is a major player in semiconductor manufacturing equipment with a market capitalization of €12 billion, a figure that falls well short of its industry peers in the United States and Taiwan. 



BESI benefits directly from growing high-end chip demand, especially from major customers like Samsung, which uses BE Semiconductor Industries products to power its AI memory (HBM) and chiplet technologies. 



With Europe's semiconductor market growing 7.2% in Q3 2025, it's clear that growing chip demand could play into the hands of BESI, which may represent a greater long-term value play in comparison to its large-cap counterparts. 



<h2>2. Indra Sistemas (BME: IDR)</h2>



The Spanish defense-focused firm is expected to benefit largely from its incorporation of artificial intelligence and growing geopolitical uncertainty, which is set to prompt an increase in spending on high-end defense technology in 2026. 



The stock has rallied more than 140% since the beginning of 2023, and the recent military involvement of the United States in Venezuela is likely to drive greater investor interest in defense stocks over the foreseeable future. 



&#34;Indra Sistemas (OTC:ISMAY) (OTC:ISMAF) is an integral company for the United States military, and the company was recently awarded a contract to supply new radars to modernize the country's air traffic control systems,&#34; said Iván Marchena, Senior Economist at global brokerage brand Just2Trade. &#34;The deal, worth $12.5 billion, will see the Spanish firm work alongside RTX Corp to replace 612 radars by June 2028.&#34; 



&#34;The stock is also a strong AI play, which has been further solidified following a partnership with Multiverse Computing to grow their AI and quantum technologies in the field of defense.&#34; 



<h2>3. STMicroelectronics (EPA: STMPA)</h2>



Another key semiconductor manufacturing stock, STMicroelectronics (NYSE:STM) remains a relatively small-cap AI option for investors despite its €22 billion market capitalization because of the sheer scale of its international peers. 



Although STMPA has experiences some volatility over the past few years, it's opened 2026 in strong stead following the announcement of a €1 billion deal with the European Investment Bank (EIB) to boost the continent's competitiveness and strategic autonomy in the artificial intelligence landscape. 



The stock also rallied in recent days following a report that Apple is in talks to adopt the Swiss semiconductor firm's LiDAR sensors for use in future iPhones. 



<h2>4. SUSS MicroTec (ETR: SMHN)</h2>



With a market capitalization of €850 million, SUSS MicroTec (OTC:SESMF) is by far the smallest European AI stock on this list, but it still holds plenty of strength when it comes to its innovation pipeline and long-term growth prospects. 



The German firm specializes in lithography and microfabrication, both of which are essential for advanced semiconductor production and recently had its rating upgraded from ‘hold' to ‘buy' by Deutsche Bank ahead of expectations for a hike in fourth-quarter order rates. 



Since the beginning of 2023, SMHN has rallied almost 190%, and with demand for semiconductors continuing to grow worldwide, this stock may have plenty of room to run should the artificial intelligence boom continue to reach new heights. 



<h2>5. Siemens Healthineers (OTC:SMMNY)</h2>



With a market capitalization of around €52 billion, Siemens Healthineers (OTC:SMMNY) (OTC:SEMHF) is far from a typical small-cap European stock, but its growth potential is well-aligned with its peers with lower valuation. 



As a medical tech company that spun out of Siemens, this stock will be a direct beneficiary of growing European investments in artificial intelligence. 



The medtech sector's AI-driven growth has been slower than other areas of the artificial intelligence industry, particularly in the field of generative AI, but we can expect demand for healthcare innovations to grow as more global aging populations pave the way for more use cases. 



Siemens Healthineers utilizes artificial intelligence through advanced diagnostics, and the use of AI in medtech can help to drive further benefits for patients and users. 



<h2>Investing in European AI</h2>



Although European AI stocks offer plenty of relatively small-cap opportunities to investors looking for growth opportunities beyond Wall Street's high-value artificial intelligence players, it's important to conduct plenty of research before adding these prospects to any portfolios. 



The artificial intelligence boom is beginning to attract conflicting forecasts among leading analysts, and any possible signs of strain in the strength of the industry's large-cap stocks may see growth slow for Europe's brightest prospects. 



Despite this, strong research in company fundamentals and an emphasis on emerging industry news can help to provide more insights into the future movements of these companies, shedding more light on which plays could be the strongest in Q1 2026 and beyond.



Disclosure: On the date of publication, Dmytro Spilka did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer. Dmytro Spilka does not intend to make a trade in any of the securities mentioned above in the next 72 hours.



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Benzinga Disclaimer: This article is from an unpaid external contributor. It does not represent Benzinga’s reporting and has not been edited for content or accuracy.

SMHN

The article discusses five small-cap European AI stocks to watch in Q1 2026, highlighting the potential for investment in Europe's AI market, which is gaining traction. The stocks include BE Semiconductor Industries, Indra Sistemas, STMicroelectronics, SUSS MicroTec, and Siemens Healthineers, each with unique strengths and growth opportunities in the AI and semiconductor sectors. The report emphasizes the resilience of these stocks compared to their larger counterparts in the U.S., especially amid concerns of an AI bubble.

5 European AI Stocks to Track in Q1 2026