ECB's Vujcic Sounds Alarm on Overvalued AI-Driven Assets

European Central Bank (ECB) Vice-President Boris Vujcic has warned that soaring market valuations driven by artificial intelligence (AI) may be prone to a correction. Speaking in an ECB podcast, Vujcic noted that the price-to-earnings and price-to-forward earnings ratios for equities are unusually high. He stated, 'This is something which we have also not seen, or have not seen for a long time... They might in the end, end up being justified, but they might not.'

Vujcic cautioned that the exposure to AI-driven assets is large and increasing, creating a risk for the repricing of equity markets. He emphasized the need for careful monitoring, saying 'we have to be very careful, monitor that because with such large exposure, so many investments going there, it creates definitely a risk for the repricing of the equity markets.'

This warning comes on the heels of ECB President Christine Lagarde's comments that asset valuations in the AI sector are high and a correction is 'entirely possible'. The remarks also follow a proposal from AI developers to slow down industry-wide development, which has led to a selloff across technology stocks.