'Worrisome': AI is driving a looming market correction, central bank economists warn

The American flag flies behind a Wall Street sign near the New York Stock Exchange (NYSE) in New York City on April 22, 2026. Angela Weiss | Afp | Getty ImagesU.S. and European stocks are scaling record highs as investors pile into the AI boom, but economists at the European Central Bank warn that history points to a sharp downturn ahead."Economic research on past technological revolutions points to a worrisome conclusion: a correction of current stock market valuations is likely," the economists wrote in a Monday blog, citing two potential scenarios. A correction could occur because "overconfident, overoptimistic investors" push prices up beyond their fundamental worth, leading to a crash when that exuberance fades, they said.But a fall in prices should be expected, even if current valuations are an accurate reflection of AI's capacity to reshape the global economy and boost corporate profits, they add. The economists cite parallels with the 19th century railway boom, the expansion of electricity and radio in the 1920s, and the rise of the internet in the 1990s — not the first time the current AI wave has been compared to the dotcom bubble of the early 2000s.In each case, investor...