AI Valuation Fears Grip Global Investors as Tech Bubble Concerns Grow

Global investors are turning cautious as concerns grow that artificial intelligence (AI) valuations have climbed too high, sparking fears of a potential tech bubble. U.S. markets led the sell-off this week, with major AI-linked companies facing sharp declines after warnings from financial regulators and analysts.

The International Monetary Fund (IMF) and the Bank of England (BoE) both raised red flags over inflated valuations. BoE Governor Andrew Bailey said that while AI could drive long-term productivity, uncertainty about future earnings poses clear risks. “We have to be very alert to these risks,” he warned.

Adding to the caution, Goldman Sachs CEO David Solomon forecast a possible 10-20% market correction within two years, citing stretched tech valuations. His comments followed a volatile week on Wall Street that wiped billions from AI stocks.

In Europe, firms like Legrand, a supplier to Alphabet and Amazon, have seen shares jump 37% this year. Yet analysts warn that even strong performers could face turbulence if AI enthusiasm cools. Sweden’s Skanska, which builds AI data centers, says its project pipeline remains solid despite market worries.

In Asia, SoftBank Group recorded nearly $50 billion in weekly losses as AI sentiment weakened. Meanwhile, investor Michael Burry’s Scion Asset Management revealed short positions against Palantir and Nvidia, intensifying debate over a potential AI correction.

Some experts see opportunity in the pullback. Glen Smith of GDS Wealth Management believes certain tech stocks are now attractively priced for long-term buyers. Others urge diversification beyond U.S. equities, with Pictet Asset Management’s Luca Paolini highlighting emerging markets like India and Brazil as safer bets.

As 2025 nears its end, optimism around AI innovation remains high, but so do fears that the boom may outpace reality. Investors are now weighing whether this week’s slide is a brief pause or the first sign of a broader reset.