Name: AI valuation fears are back and European stocks arent immune
Uploaded: 2025-11-07T15:22:28.724Z
Duration: 3 min 35 s
Description: Investors are questioning AI valuations and this could have ramifications for European companies too.

Investors are questioning AI valuations and this could have ramifications for European companies too.

Brussels

Financial leaders and institutions have raised concerns about high valuations in AI-related stocks, warning of possible market corrections. Wall Street executives, including Goldman Sachs' David Solomon, and central banks such as the IMF and Bank of England, have highlighted the risk of a potential bubble as markets attempt to value uncertain future earnings from AI.

Despite these warnings, several European companies, including Legrand and Skanska, continue to benefit from strong demand for AI infrastructure. Market strategists note that while some volatility has emerged, earnings results have generally exceeded expectations, and the overall market outlook remains positive.

AI valuation fears are back and European stocks aren't immune

This time around, we are looking indeed at this market volatility. We just simply cannot ignore it. The market volatility is coming as Wall Street leaders warn of potential market corrections and high valuations. Here's what David Solomon from Goldman Sachs had to say earlier this week. It is likely there'll be, you know, a 10 to 20 percent drawdown in equity markets sometime in the next 12 to 24 months. And I'd say there are very few people in this room that don't think that that's a meaningful possibility. It doesn't mean that the general direction of capital flows, investment, portfolio allocations changing. It just means things run and then they pull back so people can reassess. But look, this is not the first time that we have witnessed some concerns over high valuations, particularly when it comes to AI companies. Within the past month, the IMF, the Bank of England as well, have also raised alarm bells. In fact, the Bank of England Governor Andrew Baillie reiterated those concerns once again when speaking to CNBC yesterday. It is, however, quite possible that we could have a bubble at the same time, because what the markets are having to do is value the future stream of earnings from this thing. That's uncertain. So we could still have a very positive productivity contribution. The markets find that they've somewhat overdone it in terms of how big. We'll see. We'll see. But we have to be very alert to these risks. Here's one of the many reasons on why this matters. There are several European firms that are benefiting from the investments in AI. Look at Legrand, for instance, the French company. It sells products to Alphabet, Amazon and others so they can cool servers. Their shares are up roughly as much as Nvidia's so far this year. If you look at Skanska, another European company, they're a Swedish construction group. They build AI data centers, among other things. And this is what the CEO told us about what he's looking at when it comes to these AI-related concerns. In the U.S., we have a very strong pipeline of data centers and we don't see any slowdown there. We're working with large international customers and they are also interested in building data centers in Central Europe and in the Nordics and also in the U.K. So we haven't seen any slowdown, really. So let's discuss this market volatility with our next guest, Kiran Ganesh, multi-asset strategist at UBS. He's joining us this morning. Kiran, great to have you on the show. Looking at the fact that yesterday we saw this return of concerns when it comes to stretched AI valuations, do you think that we are perhaps looking at questioning the bull market at this stage? Well, I think if you look at the bigger picture, the lack of volatility so far has actually been what's been really notable. We've had a remarkably smooth rally given the scale of investment that's taking place, given the uncertainty about the future cash flows and given some of those concerns about valuation. So as we've gone through earnings season, I think it's reasonable to have expected some volatility. But actually, when we look at the results, they have been reassuring. We're still up over the course of the earnings season and they have been beating expectations. So although some volatility has been materializing this week, we think that's to be expected and the bigger picture still remains positive.

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