European IPOs shift focus from tech startups to defence and industrials amid market turbulence

A tentative rebound in European listings is being shaped less by technology start-ups and more by firms tied to traditional manufacturing, energy networks and defence, as investors reassess exposure to companies vulnerable to artificial intelligence disruption.

Recent market turbulence has prompted bankers and asset managers to favour businesses whose cash flows are linked to long-term investment programmes rather than software-led growth narratives. “If this volatility continues, you will have to think carefully about what companies you want to bring in a pre-summer window,” said Tom Snowball, head of UK equity capital markets at BNP Paribas SA. The point is echoed by other market participants who argue that defence and industrial issuers are better placed to launch successfully while sentiment around AI-driven software remains unsettled.

Evidence of that shift has been visible in this year’s deal activity. A Czech munitions group and a specialist energy-transmission business staged high‑profile public debuts that drew strong demand, and a string of suppliers to the military and infrastructure sectors have either announced listing plans or are preparing prospectuses. According to reporting, multi‑billion euro offerings from an armoured vehicle manufacturer and a major lift maker are also under consideration for later in the year.

Part of the reorientation reflects broader capital flows. City A.M. reports that AI-related venture investment remains large but concentrated, accounting for over 35% of European venture capital investment in 2025, equal to roughly €23.5 billion, while heavyweight defence and dual‑use technology raises continued apace. Euronext and market observers point to a marked surge in defence spending in 2024, with investment rising by around 42% to approximately €106 billion, and turnover in the European defence industry reaching about €183.4 billion that year.

Institutional research points to secular drivers behind renewed interest in industrials and defence. A J.P. Morgan briefing documents a recovery in the EMEA IPO pipeline, showing stronger deal flow and improved investor appetite across several sectors as macro volatility eased. Separately, Standard Chartered analysis highlights fiscal support for infrastructure and rearmament programmes in Europe during 2026 as a potential earnings tailwind for engineering, power and construction groups.

Investors and advisers say the appeal of these sectors lies in the visibility of long‑term contracts and the strategic nature of spending programmes, particularly on power transmission, electrification and defence equipment. “It’s less about the region and more about the sector these days,” said John Lamb, an investment director at Capital Group. “I’d use software as an example, where it’s a particularly treacherous area to be thinking about participating in IPOs.”

That caution does not mean the market for new issues has closed. Banks and issuers report active preparation across a spectrum of businesses, and advisers expect follow‑on equity taps from capital‑intensive companies that need funding to execute big infrastructure projects. Still, market participants caution that even listings perceived as defensive can be vulnerable if overall risk appetite deteriorates sharply: a number of recent floatations shortened their bookbuild periods to limit exposure to volatile trading.

The reallocation of capital is also visible in private markets, where analysts at Rothschild & Co note a ramp‑up in growth equity and defence‑tech funding, including large rounds for autonomous and AI‑enabled systems. Other reports point to rising global military expenditure, Stockholm International Peace Research Institute data showed world military spending grew to about $2,718 billion in 2024, underlining why investors are prioritising companies tied to strategic supply chains, semiconductors for defence applications, sensors and cybersecurity.

Regulators and exchanges have taken note of the changing mix of issuers. Some listing venues are actively courting groups in sectors linked to energy resilience and national security, positioning themselves to capture the next wave of capital raising that may bypass software‑centric offerings until investor sentiment stabilises.

For now, bankers say the calendar for Europe’s equity market will be determined by two factors: whether the market can absorb fresh supply without excessive price volatility, and whether investors regain confidence in sectors more exposed to rapid technological change. If the current pattern holds, expect a spate of listings from engineering, defence and energy‑related companies to dominate the pipeline in the near term, while technology IPOs wait for clearer valuations and less febrile market conditions.