European and Asian stocks fall amid returning fears of an AI bubble

A sell-off in the US technology sector and the return of fears of an artificial intelligence bubble have collapsed markets in Europe and Asia, pushing them to their worst weekly performance since April. Despite the obvious signs of overheating, professional investors are not yet advising getting rid of securities: "the needle" for the AI bubble has not yet been found, and the end of the year is historically favorable for the growth of shares.

Europe's blue-chip index STOXX 50 and the broader STOXX 600 collapsed more than 1% at the open of trading on Nov. 21, reversing gains from the previous two sessions amid returning concerns about the artificial intelligence sector and technology companies. Both benchmarks follow the collapse in Asian and U.S. markets and are headed for their worst weekly performance since April, Trading Economics wrote.

The region's major bourses also opened lower: Germany's DAX index lost 1.2%, dropping to its lowest level since early Ma, while France's CAC 40 fell 0.7% to a one-month low. The STOXX Europe 600 Technology benchmark, which tracks technology stocks, lost 2%. Shares of data center equipment makers Siemens Energy and Schneider Electric, which benefited from the AI boom, fell 9% and 2.8%, respectively.

Asian shares collapsed before the opening of trading in Europe: the index of securities of the Asia-Pacific region excluding Japan fell by 2.8%, and its drawdown for the week became the most significant since April. Japan's Nikkei 225 lost 2.4%. Shares of Taiwan (TAIEX) collapsed by 3.6%, and the South Korean market (KOSPI) - by 3.8%. Chinese stocks were also down, with the mainland CSI 300 and Hong Kong's Hang Seng down 2.4% each.

The global rally that followed Nvidia's optimistic forecasts was short-lived: fears about a bubble in the AI industry returned to the markets, and a mixed report on the US labor market increased uncertainty about the Fed's December rate decision. On November 20, U.S. stocks started trading in the plus, but then collapsed amid concerns over overvaluation of tech sector securities. The amplitude of Nasdaq fluctuations during the day became the strongest since April 9, when markets were shocked by the Trump administration's tariffs.

"There is no doubt that the U.S. technology sector has many signs of a bubble, but that doesn't mean it necessarily has to burst. The bubble may just deflate a bit," Reuters quoted Diana Musina, deputy chief economist at AMP Financial Corporation of Australia, as saying. "U.S. stocks typically perform well in November and December due to seasonality, so stocks should have a better end to the year."

American billionaire investor Ray Dalio is confident that the hype around AI has already inflated an "obvious bubble" in the market, but it is too early to get rid of tech sector securities. "Don't sell just because there's a bubble," Dalio told CNBC, warning, however, that entering the market at these levels historically provides "very low returns" over the next 10 years. According to Dalio, the needle has not yet been found for the AI bubble - the trigger for a collapse will not be a tough Fed policy, but rather higher taxes on wealth. Just in case, the investor advises to hedge against uncertainty with protective assets like gold.

This article was AI-translated and verified by a human editor