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ECB Economists Warn AI-Driven Stock Rally Likely to Face Sharp Correction
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ECB Economists Warn AI-Driven Stock Rally Likely to Face Sharp Correction

European Central Bank economists say historical patterns from past technology booms suggest current AI-driven stock valuations are likely to face a correction.

19 августа 2026 г.Источник: cnbc.com ↗

European Central Bank economists warned in a Monday blog post that history points to a likely correction in stock market valuations driven by the AI boom, even as U.S. and European stocks scale record highs.

"Economic research on past technological revolutions points to a worrisome conclusion: a correction of current stock market valuations is likely," the economists wrote, citing two potential scenarios that could trigger a downturn.

In one scenario, a correction could occur because "overoptimistic investors" push prices beyond fundamental worth, leading to a crash once that exuberance fades. In the other, even if current valuations accurately reflect AI's capacity to reshape the global economy and boost corporate profits, a fall in prices should still be expected, according to the economists.

The ECB economists drew parallels with the 19th century railway boom, the expansion of electricity and radio in the 1920s, and the rise of the internet in the 1990s, noting these are not the first comparisons made between the current AI wave and the dotcom bubble of the early 2000s.

"As adoption spreads...uncertainty becomes economy-wide. If something then goes wrong with that technology, the whole economy suffers," the economists wrote, adding that this dynamic drives investors to demand a higher risk premium, which their analysis found is likely to eventually push stock prices down even if profit growth remains robust.

Key risks highlighted

  • European retail investors are highly exposed, potentially without realizing it, due to the prevalence of "Magnificent 7" stocks in global index funds and pension funds.
  • A sharp correction could trigger knock-on effects through fund-based structures that threaten euro area stability.
  • "Unlike in the dot-com episode, today's starting point leaves markedly less room to cut interest rates or use fiscal policy to cushion the fallout."

The economists said the exact timing of any correction is "unknowable in advance," noting that "these boom-bust patterns are only identifiable with hindsight," and that a pullback could eventually be followed by a recovery and further climb in stocks.

Read the original report at CNBC

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