AI valuation fears grip global investors as tech bubble

• Fears of an AI bubble have heightened this week after U.S. technology shares slumped.
• The IMF and the Bank of England have sounded the alarm following the sell-off.
• Some investors see buying opportunities following this weeks dip, while others advocate looking beyond U.S. in order to avoid concentration risk in AI-related names.
  

• This weeks equity market wobble, which saw a retreat in U.S. AI-related stocks amid ongoing concerns over stretched valuations, has thrust contagion concerns into the spotlight for European investors.

  Goldman SachsCEO David Solomon warned this week of a likely 10-20% drawdown in equity markets at some point within the next two years, while the International Monetary Fund and the Bank of England have both sounded the alarm bells.
  

• 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 technology companies could be offset by uncertainty around future earning steams in the sector.

  We have to be very alert to these risks, Bailey said.

  Legrandis one of several European companies which is benefitting from the AI boom. The French company, which sells products toAlphabet,Amazonand others to help cool servers, has seen its shares surge 37% this year, roughly as much asNvidia.
  

• Anders Danielsson, CEO of Swedish construction groupSkanska, which builds data centers and other AI infrastructure assets, shrugged off concerns about a slowdown.

  In the U.S. we have a very strong pipeline of data centers we dont see any slowdown there, he told CNBC. We are working with large international customers and they are also interested in building data centers in central Europe, and in the Nordics and the U.K. We havent seen any slowdown really.

• Meanwhile Kiran Ganesh, multi-asset strategist atUBS, highlighted a notable lack of volatility, adding that the broader narrative remains positive.

  Weve had a remarkably smooth rally given the scale of investment thats taken place, given the uncertainty about future cash flows, and given some of those concerns about valuation, Ganesh told CNBCs Europe Early Edition on Friday.

  As weve gone through earnings season, I think its reasonable to have expected some volatility, but actually when we look at the results, and they have been reassuring, were still up over the course of earnings season and they have been beating expectations. So although some volatility has been materializing this week, we think thats to be expected and the bigger picture still remains positive.

• Some big tech stocks are on sale, and are presenting buying opportunitiesfor investors, especiallyfor investors who have missed out on the markets strength over the past two months, said Glen Smith, chief investment officer at GDS Wealth Management.

  Other investors have flagged concentration risk in U.S. equities, and advocate looking further afield.

  Luca Paolini, chief strategist at Pictet Asset Management, said stretched valuations mean the firm is neutral on U.S. names. Emerging markets are preferred, with diversified exposure across India, Brazil, and broader EM benefiting from AI-driven investment and monetary easing, Paolini said in a market commentary.