The AI boom just hit its first major speed bump. A sharp retreat in artificial intelligence stocks this week has reignited tech bubble fears among global investors, with SoftBank alone hemorrhaging nearly $50 billion in market value. From London to Tokyo, central bankers and fund managers are sounding alarms about stretched valuations in a sector that's driven market gains for two years straight.
The artificial intelligence goldrush just encountered its first major reality check. What started as routine profit-taking in Nvidia and other AI darlings has morphed into something more concerning - a broader questioning of whether the sector's astronomical valuations can hold up under scrutiny.
Goldman Sachs CEO David Solomon didn't mince words this week, warning investors of a "likely" 10-20% equity market correction sometime in the next two years. His timing feels prescient as AI stocks stumbled globally, with SoftBank bearing the brunt of the selloff. The Japanese conglomerate, which has positioned itself as the ultimate AI infrastructure play, watched nearly $50 billion in market value evaporate in just five trading days.
The contagion fears aren't limited to Silicon Valley. Bank of England Governor Andrew Bailey sounded unusually direct warnings about AI bubble risks during a CNBC interview, noting how the "very positive productivity contribution" from tech companies could be derailed by uncertainty around future earnings. "We have to be very alert to these risks," Bailey said, echoing concerns from the International Monetary Fund.
But the most telling signal came Tuesday when news broke that Scion Asset Management - the hedge fund run by "Big Short" legend Michael Burry - had built substantial short positions against both Nvidia and Palantir Technologies. The move drew immediate fire from Palantir CEO Alex Karp, suggesting nerves are fraying among AI's biggest cheerleaders.
Still, not everyone's panicking. European companies riding the AI infrastructure wave remain bullish about demand. Legrand, the French firm that supplies cooling systems to Google and Amazon data centers, has seen its shares surge 37% this year - matching Nvidia's gains. "We don't see any slowdown," Anders Danielsson, CEO of Swedish construction giant Skanska, told CNBC about his company's data center pipeline.
