The Bank of England has warned that stock valuations in the United States are approaching levels last seen during the dot-com bubble, while UK valuations are nearing those of the 2008 financial crisis. The central bank's latest Financial Stability Report concludes that share prices, particularly for technology and artificial intelligence companies, remain "materially stretched" and face a risk of a "sharp correction".
The report indicates that risks to financial stability have increased in 2025. Global financial markets have been shaken in recent weeks by investor concerns about a potential AI bubble.
Technology Sector Under Scrutiny
The Bank of England specifically highlighted technology and AI firms as areas of concern. Big tech and AI companies have been characterized by heavy spending and booming business valuations in recent periods.
The central bank's assessment uses the terms "materially stretched" to describe current valuations and warns of the potential for a "sharp correction" in share prices. The comparison to the dot-com bubble era marks a significant warning about US market conditions.
Banking System Resilience
Despite the warnings about stock valuations, the Bank of England concluded that the UK banking system is sturdy enough to support households and businesses even if economic conditions worsen substantially.
The Financial Stability Report comes at a time when investor concerns about stretched valuations have already begun affecting global markets. The historical comparisons to the dot-com bubble and the 2008 financial crisis underscore the severity of the central bank's assessment.
Note: This article was created with Artificial Intelligence (AI).
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