ECB’s Vujčić flags AI stock valuations as key risk

European Central Bank Vice-President Boris Vujčić set out the bank’s main risk assessment points at an event in Ireland on Monday. He named high valuations of AI-related stocks, bond market tensions and possible losses at investment funds as the principal threats to financial stability. Nasdaq has fallen close to 8 percent below its historic high.

Valuations and investor scrutiny

Preparation of the ECB’s semi-annual financial stability report ran in parallel with a correction in AI-related share prices. Investors are increasingly questioning the returns they can expect from AI investment. Vujčić said European investors are also exposed, because many investment funds hold AI-related assets.

A fall in technology stocks would therefore reach European portfolios. The report itself is due on 18 November.

Fiscal rather than monetary fixes

Vujčić said the ECB is monitoring markets closely. He expects budget problems to be addressed mainly through fiscal measures. That tempers expectations of central bank intervention. The bank also flags the shadow banking sector as vulnerable, separately from stock valuations and bond tensions.

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Source: European Central Bank