{"id":38572,"date":"2025-11-26T10:07:17","date_gmt":"2025-11-26T10:07:17","guid":{"rendered":"https:\/\/financialrush.com\/?p=38572"},"modified":"2025-11-26T10:07:17","modified_gmt":"2025-11-26T10:07:17","slug":"fomo-is-driving-stretched-us-tech-valuations-ecb-warns","status":"publish","type":"post","link":"https:\/\/financialrush.com\/?p=38572","title":{"rendered":"\u2018Fomo\u2019 is driving \u2018stretched\u2019 US tech valuations, ECB warns"},"content":{"rendered":"<p> \n<\/p>\n<div>\n<p>Stay informed with free updates<\/p>\n<p class=\"article__content-sign-up-topic-description o3-type-body-base\"><span>Simply sign up to the <!-- -->US equities<!-- --> myFT Digest &#8212; delivered directly to your inbox.<\/span><\/p>\n<p><iframe class=\"article__content-sign-up-iframe close\" scrolling=\"no\" id=\"signUpIframe\" data-prev-url=\"\/register\/in-article-sign-up?ft-content-uuid=82100215-18d0-4850-8dcd-d9745ad342d0&amp;concept-id=971c884d-f8fa-45c8-af59-bee0d7f28284\"><\/iframe><\/div>\n<div id=\"article-body\">\n<p>Valuations of US tech stocks such as Nvidia, Alphabet, Microsoft and Meta have become \u201cstretched\u201d as investors are driven by \u201cfears of missing out\u201d, the European Central Bank said on Wednesday.<\/p>\n<p>The warning, in the central bank\u2019s latest Financial Stability Review, follows similar cautions from institutions <a href=\"https:\/\/www.ft.com\/content\/fe474cff-564c-41d2-aaf7-313636a83e5b\" title=\"\" data-trackable=\"link\">including the IMF and the Bank of England<\/a> about high valuations of artificial intelligence stocks.<\/p>\n<p>\u201cCurrent market pricing does not appear to reflect persistently elevated vulnerabilities and uncertainties,\u201d the <a href=\"https:\/\/www.ft.com\/stream\/60da3242-e372-44d6-8b46-b497ef106d88\" title=\"\" data-trackable=\"link\">ECB<\/a> said.\u00a0<\/p>\n<p>Since the temporary sell-off in April over US President Donald Trump\u2019s trade tariffs, markets had been driven by a \u201crenewed risk-on sentiment\u201d that had pushed \u201calready high valuations even higher\u201d, the ECB said in the review. It added that investors were either hoping that \u201ctail risks will not materialise\u201d or were being driven by \u201cfears of missing out on a continued rally\u201d.<\/p>\n<p>Without naming individual stocks, the ECB pointed to \u201cincreasing market concentration\u201d amid\u00a0\u201cpersistently high valuations\u201d. This could result in \u201csharp, correlated price adjustments\u201d\u00a0if investors were caught out by negative surprises, it said.<\/p>\n<p>However, a market correction would not necessarily mean \u201cthe bursting of a bubble\u201d, ECB vice-president Luis de Guindos told journalists, stressing that while there were \u201cdoubts about the valuations\u201d, the ECB had not concluded that there was a bubble. <\/p>\n<p><em>\u201c<\/em>Markets are discounting a very benign scenario that AI is going to be fully<br \/>implemented and adopted all over the world,\u201d said De Guindos,<br \/>adding that investors believed that AI business plans would work as<br \/>hoped.<\/p>\n<p>\u201cIf that scenario does not become real, if there is an accident in the<br \/>near future, perhaps the valuations will have an important<br \/>correction,\u201d he added.<\/p>\n<p>The review acknowledged that the current tech boom was different to the dotcom bubble in 2000, as today\u2019s companies boasted\u00a0\u201chigh profit margins, strong earnings growth, little debt and diversified underlying businesses beyond AI\u201d. <\/p>\n<p>By contrast, the rally a quarter of a century ago was driven by lossmaking start-ups. However, \u201copaque private markets\u201d could amplify market falls this time, potentially resulting in \u201cfire sales\u201d and hitting European insurance companies, pension funds and asset managers suffering from \u201cpersistent liquidity and leverage vulnerabilities\u201d, the review said.<\/p>\n<aside aria-labelledby=\"aside-label\" class=\"n-content-recommended--single-story n-content-recommended--inset\" data-component=\"recommended\">\n<p class=\"n-content-recommended__title o3-type-body-highlight\">Recommended<\/p>\n<div class=\"o-teaser o-teaser--article o-teaser--small o-teaser--stacked o-teaser--has-image o-teaser--opinion js-teaser\" data-id=\"e05dc217-40f8-427f-88dc-7548d0211b99\">\n<div class=\"o-teaser__image-container js-teaser-image-container\"><a href=\"https:\/\/www.ft.com\/content\/e05dc217-40f8-427f-88dc-7548d0211b99\" data-trackable=\"image-link\" data-trackable-context-story-link=\"image-link\" tabindex=\"-1\" aria-hidden=\"true\"><\/p>\n<div class=\"o-teaser__image-placeholder\" style=\"aspect-ratio:8533\/4800\"><\/div>\n<p><\/a><\/div>\n<\/div>\n<\/aside>\n<p>The report explicitly mentions \u201cmarket concern over central bank independence and US debt\u201d as one of the scenarios that could trigger a market correction. Trump has repeatedly lashed out this year against Federal Reserve chair Jay Powell, whose term will end in May, and unsuccessfully tried to oust Fed governor Lisa Cook over allegations of mortgage fraud. <\/p>\n<p>The central bank is also concerned about a potential meltdown of the US Treasuries market over <a href=\"https:\/\/www.ft.com\/content\/34194bfa-b8ea-4301-8212-a554ee721aeb\" title=\"\" data-trackable=\"link\">spiralling borrowing<\/a> under the Trump administration. This could not only \u201ctrigger stress in global benchmark bond markets\u201d but also \u201cprompt a broader reassessment of sovereign risk in the euro area\u201d, it said in the review.<\/p>\n<p>In addition, it warned about a potential new European sovereign debt crisis as France struggles to bring its large deficit under control. <\/p>\n<p>Without naming the Eurozone\u2019s second-largest economy, the report pointed to Euro countries \u201cwith more fragile political landscapes\u201d, their violations of EU deficit rules and their failure to stick to planned budgets. \u201cWeak fiscal fundamentals in some euro area countries\u2009.\u2009.\u2009.\u2009could test investor confidence and trigger stress in bond markets,\u201d the central bank said. <\/p>\n<\/div>\n\n<br \/><a href=\"https:\/\/www.ft.com\/content\/82100215-18d0-4850-8dcd-d9745ad342d0\">Source link <\/a><\/p>\n","protected":false},"excerpt":{"rendered":"Stay informed with free updates Simply sign up to the US equities myFT Digest &#8212; delivered directly to&hellip;\n","protected":false},"author":5,"featured_media":38573,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[23],"tags":[],"class_list":["post-38572","post","type-post","status-publish","format-standard","has-post-thumbnail","category-us","cs-entry","cs-video-wrap"],"_links":{"self":[{"href":"https:\/\/financialrush.com\/index.php?rest_route=\/wp\/v2\/posts\/38572","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/financialrush.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/financialrush.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/financialrush.com\/index.php?rest_route=\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/financialrush.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=38572"}],"version-history":[{"count":0,"href":"https:\/\/financialrush.com\/index.php?rest_route=\/wp\/v2\/posts\/38572\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/financialrush.com\/index.php?rest_route=\/wp\/v2\/media\/38573"}],"wp:attachment":[{"href":"https:\/\/financialrush.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=38572"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/financialrush.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=38572"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/financialrush.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=38572"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}