AI valuation fears grip global investors as tech bubble concerns grow

This week, a notable decline in U.S. AI-related stocks has reignited worries about inflated valuations, drawing the attention of investors across Europe. David Solomon, CEO of Goldman Sachs, has cautioned that a significant market correction of 10-20% could occur within the next two years. This warning aligns with the recent alerts from both the International Monetary Fund and the Bank of England. In a conversation with CNBC, Bank of England Governor Andrew Bailey emphasized the potential for an AI bubble, acknowledging that while technology companies have contributed positively to productivity, uncertainty regarding future earnings could negate these benefits. "We must remain vigilant to these risks," Bailey stated. Among the firms thriving in the midst of the AI surge is Legrand, a French company providing cooling products for data centers. Their shares have soared by 37% this year, paralleling the performance of Nvidia. Anders Danielsson, CEO of Swedish construction firm Skanska, which specializes in building data centers, remains optimistic despite the concerns. "In the U.S., we have a robust pipeline of data centers, and we see no signs of a slowdown," he remarked. He also noted growing interest from international clients in establishing data centers across central Europe, the Nordics, and the U.K. Kiran Ganesh, a multi-asset strategist at UBS, pointed out the surprising stability in the market, suggesting that the overall sentiment remains optimistic. "Given the scale of investment and the uncertainties surrounding future cash flows, it’s remarkable that we’ve experienced such a smooth rally," he told CNBC's "Europe Early Edition." Ganesh noted that despite recent market fluctuations, the earnings results have largely exceeded expectations, contributing to a positive outlook. Glen Smith, chief investment officer at GDS Wealth Management, suggested that some major tech stocks are currently undervalued, creating buying opportunities for those who missed out on recent market gains. Conversely, concerns about concentration risk in U.S. equities have prompted some investors to explore alternative markets. Luca Paolini, chief strategist at Pictet Asset Management, expressed a cautious stance on U.S. stocks due to high valuations, favoring emerging markets like India and Brazil, which are likely to benefit from AI-related investments and monetary easing.