Frankfurt am Main, 17 August 2026

By Malin Andersson, Johannes Breckenfelder, Stefano Corradin, Kalin Nikolov and Maria Antonietta Viola

The rise of AI has driven a blistering rally in the tech sector, bringing stock market valuations to levels last seen during the dot-com bubble. Although AI is reshaping the economy, do today’s high valuations bear the risk of an abrupt and painful setback in the euro area?

Valuations on the US stock market, as measured by the CAPE ratio, are currently close to their historical peak.^[1] Euro area equity valuations have also risen, albeit to a lesser extent (Chart 1). Markets on both sides of the Atlantic reflect investors’ enthusiasm about artificial intelligence (AI) shaping the…