Europe’s leading industrial companies are adopting markedly different approaches to capitalizing on the growth opportunities presented by the artificial intelligence (AI) boom, reflecting distinct strategic priorities in their investments and acquisitions.
Schneider Electric and Siemens are intensifying their focus on software and AI, while ABB is concentrating on expanding its portfolio of physical industrial equipment. This divergence comes as the three companies—Europe’s largest industrial groups—have all recently raised earnings forecasts and secured strong financial positions, enabling them to pursue significant acquisitions.
Last week, Schneider announced its agreement to acquire the US engineering software firm PTC for nearly $24 billion, marking the largest Europe-to-North America industrial deal since 2021. The French company described the deal as creating a “complete software and AI powerhouse,” combining its existing hardware offerings for power management and cooling with PTC’s software solutions used in product design and servicing. Despite this, Schneider’s stock dropped 10% on the day of the announcement, with some analysts expressing concerns about potential dilution of its energy management business and questioning the timing of such a large investment amid sector uncertainties.
In contrast, ABB’s recent $5.5 billion acquisition of UK industrial-components manufacturer Rotork underscores its preference for physical equipment over external software acquisitions. Although ABB employs approximately 2,000 software engineers internally, its leadership emphasizes organic software development and cautions against purchasing companies outside its core expertise. ABB's chairman Peter Voser highlighted this strategic difference, stating the company’s intent to build software capabilities internally rather than through acquisitions. Industry observers note that ABB’s concentration on equipment for utilities, industrial sectors, and data centre infrastructure reflects a belief that market leadership in hardware can yield profitability without heavy reliance on software purchases.
Siemens, Europe’s largest engineering group, has long pursued a hybrid strategy, investing heavily in software over the past two decades. Notable transactions include its acquisition of UGS nearly 20 years ago and last year’s $10 billion purchase of Altair Engineering, a firm specializing in software for automotive, aerospace, and energy sectors. Siemens has underscored its commitment to integrating physical and digital technologies, viewing this blend as essential for future industrial competitiveness.
All three companies are deeply engaged in supplying technology to data centres, driven by the rapid expansion of AI infrastructure globally. Schneider’s exposure to data centres was approximately €10 billion last year, around 25% of its total revenues. ABB’s technology accounts for about $3 billion, roughly 10% of its sales, while Siemens reported data centre-related revenues exceeding €3 billion in the first nine months of its fiscal year, marking a 50% increase year-on-year and representing about 7.5% of its core business sales.
Looking ahead, analysts see two primary pathways for these firms to benefit from AI: ongoing demand in data centre technology and the broader deployment of industrial AI. This emerging field leverages extensive industrial data collected from manufacturing and production sites to optimize operations through machine learning, improving design, reducing errors, lowering costs, and cutting carbon emissions. However, while the potential is substantial—given Europe’s rich industrial data heritage—the implementation of industrial AI remains nascent.
Market participants also voice caution over a possible bubble in AI valuations. ABB’s chair acknowledged steady demand for equipment but expressed concern about challenges related to financing the current boom. Meanwhile, Siemens and Schneider continue to bet on combining hardware and software solutions as integral to success in the evolving industrial landscape.
As one analyst noted, the future of industrial manufacturing increasingly depends on seamlessly integrating physical assets with advanced digital capabilities, underscoring the varied but complementary strategies of Europe’s industrial giants.