European shares flat as AI caution prevails

European shares were subdued on Tuesday, as elevated valuations in global AI-related stocks dictated caution, while investors watched a NATO summit in Turkey for possible new government defense contracts.

The pan-European STOXX 600 index .STOXX was flat at 650.84 points by 0713 GMT, after closing below record high levels in the previous session.

The technology sector .SX8P led declines, down 1.6%, with chip equipment maker ASML ASML.AS and semiconductor company Infineon IFXGn.DE down 4% each.

Siemens Energy ENR1N.DE lost 5.5% after brokerage Barclays downgraded the AI equipment maker to "underweight" from "equal-weight."

European tech stocks were tracking a glum mood in global markets on concerns that a quarter-long rally in chip stocks had made the sector overvalued.

South Korea's Samsung Electronics 005930.KS shares slid despite strong forecasts, while Nasdaq futures on Wall Street slipped nearly 1%.

The defence sector .SXPARO was marginally higher, with the focus on the NATO summit, where countries were anticipated to announce fresh deals in response to U.S. pressure to increase European defence spending. The sector is the top performer on the STOXX index so far this month.

Sweden's defence equipment maker Saab SAABb.ST jumped 5.3% after brokerage Morgan Stanley upgraded the stock to "overweight" from "underweight".

Among others, Shell SHEL.L rose 2.2% after the energy giant slightly raised its second-quarter integrated gas outlook.

-Reporting by Johann M Cherian and Tharuniyaa Lakshmi in Bengaluru; Editing by Harikrishnan Nair/Reuters