AI valuation fears grip investors as tech bubble concerns heighten

This week, volatility in the stock market, which resulted in a decline in US AI-related stocks amid ongoing concerns about stretched valuations, has brought contagion fears to the fore for global investors.

Goldman Sachs The International Monetary Fund and the Bank of England have sounded alarm bells as CEO David Solomon this week warned of a “likely” 10-20% decline in share markets over the next two years.

Bank of England Governor Andrew Bailey highlighted the possibilities of an AI bubble in an interview with CNBC on Thursday, noting that the “very positive productivity contribution” from tech companies could be offset by uncertainty about future earnings streams in the sector.

“We have to be very careful about these risks,” Bailey said.

Legrand is one of the few European companies to benefit from the artificial intelligence boom. French company that sells its products Alphabet, Amazon and others have seen their shares rise 37% this year to help cool servers. Nvidia.

Anders Danielsson, CEO of Swedish construction group Skanska, which builds data centers and other AI infrastructure assets, shrugged off concerns about the slowdown.

“We have a very strong pipeline of data centers in the US; we’re not seeing any slowdown there,” he told CNBC. “We work with large international customers and they are also interested in building data centers in Central Europe, the Nordic countries and the UK. We haven’t really seen any slowdown.”

Meanwhile, multi-asset strategist Kiran Ganesh UBSHe highlighted a notable lack of volatility and added that the broader narrative remains positive.

“Given the scale of the investment taking place, the uncertainty around future cash flows and some concerns around valuation, we’ve had a pretty decent rally,” Ganesh told CNBC’s “European Early Edition” on Friday. he said.

“As we’re through earnings season, I think it’s reasonable to expect some volatility, but actually when we look at the results and they’re reassuring, we’re still well into earnings season and they’re exceeding expectations. So while there’s been some volatility this week, we think that’s to be expected and the big picture is still positive.”

Still, many investors appear uneasy about spiraling valuations.

While the shares of SoftBank Group, which operates in artificial intelligence infrastructure, semiconductor and application companies in Asia, experienced a sharp decline, the Japanese group suffered a weekly loss of approximately $ 50 billion. SoftBank continued its downward trend on Friday after falling nearly 10% on Wednesday.

On Tuesday, it was revealed that hedge fund Scion Asset Management, led by “The Big Short” investor Michael Burry, had established a short position against both. Palantir Technologies And NvidiaIt drew the ire of Palantir CEO Alex Karp.

“Some big tech stocks are on the sell-off, presenting buying opportunities for investors, especially those who have missed the strength of the market in the last two months,” said Glen Smith, chief investment officer at GDS Wealth Management.

Other investors point to concentration risk in U.S. stocks and advocate looking further afield.

Luca Paolini, chief strategist at Pictet Asset Management, said stretched valuations meant the firm was neutral on US names. “Among India, Brazil and broader emerging markets, emerging markets are favored with diversified risks benefiting from AI-driven investing and QE,” Paolini said in a market commentary. he said.