European Central Bank Warns AI Tech Rally Drives Looming Stock Market Correction Risk

European Central Bank economists warn an AI-driven stock market valuation correction looms ahead. Economists highlighted that European retail investors face severe exposure through heavy "Magnificent 7" holdings inside global index and pension funds. The analysis drew direct historical parallels to the 19th-century railway boom, 1920s radio expansion, and the 1990s internet bubble. They noted that central banks currently have markedly less room for interest rate cuts or fiscal intervention than they had during the dot-com era. "Unlike in the dot-com episode, today's starting point leaves markedly less room to cut interest rates or use fiscal policy to cushion the fallout." — European Central Bank Economists Everyone knows tech valuations are overextended, but central bankers admitting they lack the interest rate room to cushion the drop is the real warning.