The European Central Bank raised worries about investor concentration in U.S. technology firms on Wednesday, such as Nvidia (NVDA, Financials) and AI-related equities, leading to fears about asset price bubbles.
"This concentration among a few large firms raises concerns over the possibility of an AI-related asset price bubble," the ECB stated in its Financial Stability Review released today. "In a context of deeply integrated global equity markets, it points to the risk of adverse global spillovers, should earnings expectations for these firms be disappointed."
Focusing on control of money supply and inflation via interest rate policy, the ECB serves the 20 European nations utilizing the euro. Its analysis also pointed to additional weaknesses in financial systems like geopolitical uncertainty, climate-related concerns, and cyberattacks.
"These issues are associated with climate-related risks − both transition and physical − on the way to a low-carbon economy; cybersecurity weaknesses, including outages of systemic IT providers, and the rise of AI; and geopolitical fragmentation sending global economic, trade and financial integration into reverse," the report said.
The ECB also underlined geopolitical issues, stressing uncertainties resulting from Russia's war against Ukraine, the continuous turmoil in the Middle East, higher trade tensions with China, and possible U.S. tariffs.
The Financial Stability Review evaluates hazards to the financial system of the eurozone and offers suggestions to help to solve structural problems.
