"AI Bubble Warning!" ECB Economists Sound Alarm Over Looming US Tech Stock Crash, Compare Frenzy to Dot-Com Bust!

In a major warning for global investors and stock markets, senior economists at the European Central Bank (ECB) have warned that a significant correction in US technology stocks is increasingly likely. In a detailed research post published on Monday, the economists cautioned that historical booms driven by transformative technological revolutions much like the late-1990s Dot-Com era-almost always end in a market bust when unrealistic corporate growth expectations collide with economic reality.
US equity valuations-measured by the cyclically adjusted price-to-earnings (CAPE) ratio-are hovering near their all-time historical peaks. The authors explained that even if Artificial Intelligence (AI) succeeds in boosting real-world corporate productivity, company share prices could still drop sharply because stock markets have priced in overly optimistic profit targets that are nearly impossible to fulfill. When this overconfidence fades, investor sentiment can reverse rapidly, triggering heavy sell-offs across the "Magnificent Seven" tech giants-including Nvidia, Microsoft, Apple, Alphabet, Amazon, Meta, and Tesla.
Making the situation more precarious, the report warned that governments and central banks currently have limited financial and interest rate buffers to cushion the blow of a severe market crash.