AI Boom Valuations Face Reality Check as Big-Tech Earnings News Transmits Global Market Shockwaves
The current AI boom is causing growing concern among policymakers and big-tech CEOs. The Bank of England's Monetary Policy Report in February 2026 noted that an asset price correction could be a key risk to the global economy. Researchers explored how negative earnings news from the 'Magnificent Seven' US tech companies affects global markets.
They found that such news causes significant market reactions, including declines in equity indices, widening credit spreads, and depreciation of the US dollar. This is unusual compared to other financial stress episodes, where there would typically be a flight-to-safety into US government bonds.
The researchers believe this is because the AI boom has been linked to expectations of increased economy-wide productivity. If these expectations disappoint, investors may withdraw from both US debt and equity markets, causing a sharp market downturn.