El BCE advierte de una corrección de las tecnológicas de EEUU

The European Central Bank (ECB) has warned of a potential correction in US technological stocks, which could threaten the financial stability of the eurozone, even if artificial intelligence meets investors' expectations, according to a team of ECB economists. In a blog post, the researchers highlighted that a downturn in the technology sector does not necessarily stem from irrational exuberance and should be expected even if current valuations are rational.

The warning is relevant for Europe despite the majority of technology stock gains over the past years occurring in US markets. Eurozone households have exposure of around €440 billion to US technology stocks mainly through investment funds. Insurance companies and pension funds also have significant exposure to so-called "seven magnificents," the high-capitalization technology stocks.

The US and eurozone stock markets have historically shown high correlation, leaving European investors vulnerable to a Wall Street drop, the economists add. The repercussions of a US market decline would not be limited to the United States but could become a financial stability issue for the eurozone, the economists write. They also note that a market crash combined with generalized market instability would be especially dangerous.

The Nasdaq 100 index, with a heavy technology weighting, experienced a correction last month but has since recovered to near its historical high. Economists compare the surge in AI investment to previous innovation-driven movements, such as the 19th-century railroad boom, the 1920s electricity expansion, and the dot-com era of the early 2000s.

In each case, a truly transformative technology attracted investment, and the stock valuations of the companies adopting it soared before falling dramatically, the ECB economists say. They argue that these technological advances generate extreme uncertainty, as the global economic impact was unclear at the outset. In the early stages of a revolutionary innovation, stocks of pioneering companies like Nvidia offer significant opportunities to early investors, who can either make enormous gains or lose their entire investment.

This option value raises the stock valuation of pioneering companies, causing a sharp increase in their price-to-earnings ratios. However, this changes if the technology succeeds and spreads throughout the economy. The uncertainty surrounding innovative technology then shifts from individual companies to the overall economy. If there is any problem with that technology, the entire economy is affected, the economists argue.

While adopting AI successfully could drive profits, the increase in this risk premium pushes stock valuations in the opposite direction, meaning that stock prices could end up falling even if the technology itself succeeds.