Europe’s best-performing stock of 2026 rides AI photonics wave

A clamour by investors for stocks that stand to benefit from the boom in artificial intelligence has propelled a little‑known French company to the top of Europe’s 2026 equity rankings.

Soitec SA, a semiconductor materials maker with a market capitalisation of about €3.1 billion ($3.7 billion), is the top performer in a Bloomberg index of the region’s large, mid and small-cap stocks with a gain of almost 270% this year. It’s up 66% this month and analysts are raising price targets.

After a two-year slump that erased 85% of its market value, Soitec’s presence in the fast-growing field of photonics has prompted a rapid rebound. The technology, which accounts for only a small proportion of the company’s sales, is increasingly being used in data centres to handle powerful workloads and stocks with exposure are in demand from the US to Asia.

“There’s a market frenzy about photonics in general, that’s what the market wants, it’s much broader than Soitec,” said Stéphane Houri, head of equity research at Oddo Bhf. “While photonics only account for €100 million of sales, it’s the visibility on the growth of demand for the technology which is driving the stock.”

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Silicon photonics uses light to transmit data and has the potential to be faster and more power-efficient than older copper-based connections in data centres. Companies selling technology to optimise data-centre performance are seeing surging demand from large tech firms, which are spending heavily to build out AI infrastructure.

Analysts, who have been cutting Soitec’s price targets for years, are slowly warming to the stock. Oddo BHF raised its target to €85 from €50 this week, a price that was exceeded on Thursday. Several others, including Deutsche Bank AG, have also recently increased their objectives.

Still, some are sceptical of Soitec’s rally, reflecting uncertainty over whether photonics momentum can fully offset continued weakness in smartphones, which still account for more than half of the company’s revenue.

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Citigroup Inc. reiterated a sell rating on April 10, projecting a 17% decline in smartphone unit volumes in fiscal 2027 and prolonged inventory digestion into 2028, even as it raised longer‑term earnings estimates and boosted its price target by almost 50% on stronger photonics demand.

That mix of structural optimism and fundamental caution has turned Soitec into a market outlier — and a volatile one. The stock’s 30‑day volatility of 110% is nearly five times the Stoxx 600’s 21%, making it one of the most volatile stocks among European mid‑caps.

On April 10, the shares jumped 19% in a single session, underscoring how aggressively investors are positioning for an AI‑driven photonics cycle.

© 2026 Bloomberg

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