While the relief was evident in global stocks on Thursday, even Nvidia’s upbeat results were unlikely to allay concerns about a fall back to earth for highly valued tech stocks amid ongoing worries about whether its AI spending will pay off.Global stock prices have fallen almost 3% this month, which will mark the biggest monthly decline since March, driven in part by concerns that the rally in tech stocks has gone too far, too fast.
“Concerns around technology will persist and every quarter we are likely to see the same concerns as markets question the concentration,” said Seema Shah, chief strategist at Principal Global Investors in London.
“That story won’t go away.” Shah said that while she was overweight U.S. stocks, she was also wary of concentration risks and that was one of the reasons she looked at European stocks. AI BUSINESS RESULTS AS IMPORTANT AS DATA PRINTS
Investors and analysts say that as AI emerges as a so-called megatrend, earnings results like Nvidia’s have become as important in shaping views on the economic outlook as monthly economic releases. The next big dates on the calendar range from upcoming technology revenues to signs of how widely AI is being adopted, justifying the spending.
Investors should brace for a bumpy ride.
“Investors should be concerned about the risk of a bubble,” Mark Haefele, chief investment officer at UBS Global Wealth Management, told reporters on a call Thursday about the 2026 outlook.
The so-called “Magnificent Seven” – including Nvidia and Meta – have seen their share prices soar, fueling fears about the extent of market exposure to just a few names.
Technology companies have been among the big fallers on the stock market in recent days, although they are still well up this year.
The S&P 500’s technology sector’s forward price-to-earnings ratio — a measure of how much a company is worth compared to future earnings — is about 30 times larger, well above the 10-year average of 22.2.
The frenzy in AI stocks has drawn comparisons to the dot-com boom and bust of the 1990s, as concerns about tech companies’ debts mounted.
Nvidia generated $60 billion in free cash flow over the past 12 months, David Trainer, CEO of investment research firm New Constructs, said in a note. To justify its current share price, it would need to generate $2.1 trillion in annual cash flows within a decade, he said.
On Wednesday, Amundi, Europe’s largest asset manager, said it was underweight mega-cap stocks ahead of Nvidia results.
While it hasn’t sold the stocks in most of its portfolios, it has hedged with derivatives that give it the option to sell them instead, says Amundi’s CIO, Vincent Mortier.
Director Global’s Shah said she was looking at Europe.
“Europe has lower exposure to technology, so it’s a nice way to diversify against concentration risk,” she said
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