Financial markets worldwide are experiencing a significant downturn, with more than $1 trillion erased from the cryptocurrency sector over the past six weeks. The digital asset market has declined by approximately 25% since early October, with Bitcoin falling to around $91,000, its lowest valuation since spring.
This market turbulence extends beyond cryptocurrencies, affecting traditional stock indices across multiple continents. European markets saw substantial declines, with London’s FTSE 100 dropping 1.3% and the broader European Stoxx 600 index falling 1.8%. Asian markets experienced even steeper losses, particularly in Japan where the Nikkei 225 index plunged 3.2%.
Industry leaders are expressing concern about potential overvaluation in the artificial intelligence sector. The CEO of Alphabet noted that “irrationality” has entered the current AI investment landscape, warning that no company would escape unscathed if an AI bubble were to burst. Similar caution came from JP Morgan’s vice chairman, who suggested that AI valuations require reassessment and predicted an upcoming market correction.
The co-founder of Klarna voiced particular concern about massive investments flowing into computing infrastructure and data centers. He highlighted that the rising valuations of AI-focused companies, including major chip manufacturers, could have widespread implications given how institutional investments and pension funds are tied to these assets.
Market analysts point to shifting expectations regarding U.S. interest rate policy as contributing to the downturn. The diminished likelihood of near-term rate cuts has reduced the appeal of non-yielding assets like gold, which also saw price declines.
According to a Bank of America survey, professional investors now view an AI market bubble as one of the most substantial risks facing global markets, with nearly half of fund managers identifying it as their primary concern.
Despite the current pessimism, some analysts anticipate market stabilization in the coming quarters, particularly if central banks eventually implement expected rate reductions and maintain their current patterns of gold acquisition as part of diversification strategies.
