> The rise of AI has driven a blistering rally in the tech sector, bringing stock market valuations to levels last seen during the dot-com bubble. Although AI is reshaping the economy, do today’s high valuations bear the risk of an abrupt and painful setback in the euro area?
> A sharp stock market correction would have severe consequences for the euro area, through two channels. One is euro area investors’ direct exposure to the Magnificent Seven stocks (hereafter Mag7) and the other is the degree of overexuberance in euro area stock markets themselves. This post explains why a correction should be expected even if current valuations are rational, why that matters not only to the shareholders who would take the direct hit, and what it implies for the euro area specifically.
Archive: https://archive.is/20260817152928/https://www.ft.com/content...
Actual ECB blog post: https://www.ecb.europa.eu/press/blog/date/2026/html/ecb.blog...
> The rise of AI has driven a blistering rally in the tech sector, bringing stock market valuations to levels last seen during the dot-com bubble. Although AI is reshaping the economy, do today’s high valuations bear the risk of an abrupt and painful setback in the euro area?
> A sharp stock market correction would have severe consequences for the euro area, through two channels. One is euro area investors’ direct exposure to the Magnificent Seven stocks (hereafter Mag7) and the other is the degree of overexuberance in euro area stock markets themselves. This post explains why a correction should be expected even if current valuations are rational, why that matters not only to the shareholders who would take the direct hit, and what it implies for the euro area specifically.