European Fintech Draws in Investors Seeking Refuge From Wall Street’s AI Bubble

As fears on Wall Street mount over the sustainability of the AI boom, Europe’s fintechs are showing their worth. 

Recently, WIRED author Brian Merchant spoke to University of Maryland economists Brent Goldfarb and David A. Kirsch, who devised their own scale for assessing whether certain innovations led to a market bubble. 

The economists analyzed 58 historical examples of tech bubbles and broke them down to their core components to create a scale from one to eight, where eight is the most likely to predict a bubble. 

Looking at factors like uncertainty, pure plays, novice investors, and narratives around commercial innovations, Goldfarb concluded that the AI bull run is a fully fledged eight. While this doesn’t confirm that we’re in a bubble, it shows that all the hallmarks are present. 

Billionaire Peter Thiel recently offloaded his entire stake in leading AI stock Nvidia (NASDAQ: NVDA), according to 13F filings by Thiel Macro LLC. The total sell-off amounted to 537,742 shares in the chipmaker in Q3. 

Michael Burry, the investor who inspired The Big Short, also opened short positions against Nvidia and Palantir, betting that each stock is set to decline in value. 

The outlook for Wall Street AI firms is becoming increasingly clouded as concerns over a growing bubble mount. But in Europe, there’s a more optimistic tone surrounding the continent’s fintech sector. 

Could European fintech be an antidote to the artificial intelligence bubble? Let’s take a deeper look at a market that’s gathering momentum: 

The Heart of Fintech Innovation

European fintech is growing at a rapid pace. Forecasts suggest that the continent’s Buy Now Pay Later (BNPL) market size is set to expand from a value of $2.46 billion in 2024 to $18.32 billion by 2033, representing a CAGR of 25.2%. 

This expected growth comes despite the recent news that leading UK-based fintechs Revolut and Wise are reportedly eyeing listings in the United States. 

“The jewel in the crown of European fintech is Adyen (AMS: ADYEN), which has a capitalization of €43.04 billion ($49.9bn) and provides flexible cross-border payment solutions for merchants at scale,” said Iván Marchena, Senior Economist at global brokerage brand Just2Trade.

“Crucially, Adyen’s client list spans a wide range of sectors and features names like Uber, Netflix, and Spotify. At a time when there are tangible concerns over the self-funding cycle of AI giants on Wall Street, we’re seeing more fintechs build a sustainable client pool that could help to ensure their longevity.” 

Platforms like Klarna, which serve more than 100 million customers in 17 countries, are an example of the immediate success that many European fintechs have found in immediately accessing major international markets with their services. 

Strength in Innovation

There are signs that Europe’s fintech ecosystem is gathering momentum. Flatpay, which facilitates card payments for SMBs, recently reached a value of $1 billion. 

The startup has already sought to take on its larger rivals by introducing a flat transaction rate for merchants to use its card terminals and point-of-sale systems. Impressively, the Danish startup has claimed that it has grown from 7,000 customers in April 2024 to 60,000 today. 

Flatpay’s own valuation has also grown exponentially and is now valued at €1.5 billion ($1.75bn). 

Given its high growth rate, CEO and co-founder Sander Janca-Jensen is now targeting annual recurring revenue (ARR) to solidify Flatpay’s emergence into a profitable European fintech platform. 

Europe is also becoming a key location for blockchain innovations in the fintech landscape. MQube, a platform that tokenizes mortgage debt by converting financial assets into digital tokens and recording them on a shared ledger, has now tokenized £1.3 billion ($1.7bn), underlining its position as a driving force for securing mortgages using blockchain technology. 

As blockchain and digital currency technology become increasingly intertwined with fintech, Europe has an opportunity to use its leading position in the ecosystem to introduce cutting-edge financial tools and services to drive further growth throughout the ecosystem.

This helps to ensure a pipeline for innovation, even as leading domestic players like Revolut and Wise remain attracted to the prospect of US listings. 

Sustainable Tech Investing

At a time when suspicions over the longevity of the AI boom are continually coming into question, Europe’s melting pot of innovative fintechs can be a major draw for investors who are seeking exposure to stocks with higher growth potential as AI investments receive mixed levels of sentiment. 

Given that fintech solutions are finding adoption in a more frictionless manner, it’s reasonable to expect European firms to achieve sustainable growth that can help them find profitability and scalability in the future. 

Whether the artificial intelligence boom is in a bubble or not, Wall Street investors can find plenty of opportunities throughout Europe’s melting pot of fintech innovators, and these tech firms could offer some resilience in the face of uncertainty in AI.