AI-fueled rally could snap back, ECB economists warn
European Central Bank economists warn that even if AI boosts profits, current stock valuations could undergo a sharp correction as investors demand higher risk premia amid tech-transition uncertainty. The analysis notes two paths to a pullback—prices overshooting fundamentals due to optimism, or a downturn even if AI’s potential proves real—citing historical booms around transformative technologies. European exposure via Magnificent 7 index funds raises systemic risk, and the fallout could threaten euro-area stability, with limited policy room to cushion a crash.
