ECB Warns AI Stock Correction Could Eclipse Dot-Com Bust

The artificial-intelligence boom has driven valuations of major U.S. technology companies well above historical averages as investors price in years of rapid earnings growth. The European Central Bank said the rally’s concentration and dependence on optimistic expectations have increased financial-stability risks. A reversal could erode household wealth, tighten financing conditions and spill from equity markets into the broader economy.

In its latest analysis, the ECB warned that AI-linked stocks face an exceptionally high risk of a valuation correction. It said the economic fallout could prove harder to contain than after the dot-com bubble burst around 2000 if falling share prices coincide with wider market turmoil. Unlike that period, policymakers now have more limited room to cushion the shock through interest-rate cuts or fiscal support.