AI Valuation Fears Impact European Markets Amid Global Tech Correction

This analysis is based on the CNBC International report [1] published on November 7, 2025, which highlights that AI valuation fears have resurfaced and are affecting European stocks, signaling that European markets are not immune to growing concerns about artificial intelligence company valuations. The correction follows broader market weakness in AI-related stocks, with approximately $500 billion wiped from semiconductor valuations globally [2].

The AI valuation correction has created a synchronized global market response, though with varying intensity across regions:

The correction originated in US markets, with the Nasdaq 100 declining 1.74% on November 6, 2025, followed by a technology sector drop of 1.58% on November 7, 2025 [0]. Key AI stocks showed substantial declines, with NVIDIA falling 3.65% to $188.08 [0], while Palantir Technologies reportedly declined 8% despite beating earnings expectations [3].

European markets showed more muted but still significant reactions. The STOXX Europe 600 was relatively flat at 567.61 (-0.05%) on November 7, 2025 [5], but major European AI-exposed companies experienced notable declines. ASML Holding, critical for AI chip manufacturing equipment, fell 1.39% to $1,029.20 [0], while SAP SE declined 2.75% to $253.88 [0] [0].

Asian markets experienced more severe declines, with Japan’s Nikkei 225 tumbling 2.03% [5], suggesting that markets with higher AI exposure may be experiencing greater volatility.

The current correction appears driven by concerns over extreme valuation levels in AI-related companies:

Palantir Technologies was trading at approximately 700x earnings multiple, implying investors would need 700 years to recoup investments through company profits alone at current earnings levels [3]. Even after recent corrections, NVIDIA maintains a P/E ratio of 53.58 [0], reflecting continued premium valuations.

The technology sector’s 1.58% decline represents the second-worst performing sector after Industrials (-2.28%) and Consumer Cyclical (-2.13%) [0], indicating that AI valuation concerns are spilling over into broader technology investments rather than being isolated to pure-play AI companies.

The correction reflects a significant shift in investor psychology toward AI investments:

Market analysts describe current conditions as showing “new-found prudence over AI stock valuations” [2]. Veteran investor Mark Mobius characterized the AI space as having “a lot of froth” and expects corrections in companies emphasizing AI with excessive spending [4].

The “Big Short” investor Michael Burry has reportedly placed significant bets against major tech stocks, adding to market nervousness [2]. This institutional skepticism appears to be driving the broader market correction beyond just retail investor concerns.

The analysis reveals several important insights about how AI valuation concerns transmit between markets:

European companies in the AI supply chain, particularly ASML in semiconductor equipment, are experiencing direct impact despite not being pure AI companies. This suggests that AI valuation concerns are affecting the entire AI ecosystem, not just end-user AI companies.

European markets showed more resilience than Asian markets but less than US markets, potentially reflecting different levels of AI exposure and investor composition. The STOXX Europe 600’s relative flatness (-0.05%) compared to the Nikkei’s 2.03% decline suggests European markets may have lower AI exposure or more defensive positioning.

The $500 billion wiped from semiconductor valuations globally [2] demonstrates the systemic importance of AI-related investments to broader market stability. This suggests that AI valuation concerns could have far-reaching implications beyond the technology sector, potentially affecting:

The correction may trigger broader sector rotation as investors reassess growth versus value investments across all sectors.

Companies throughout the AI supply chain, from equipment manufacturers to component suppliers, may experience prolonged valuation pressure.

The current AI valuation concerns may lead to further corrections, particularly in European companies with high exposure to AI-related revenues or partnerships. The extreme valuations seen in some AI stocks (700x earnings multiples) suggest significant downside potential if growth expectations are not met.

The technology sector’s broad decline (-1.58%) indicates that AI valuation concerns are creating sector-wide volatility that could spill over into other market segments. The combination of extreme valuations, institutional skepticism, and broader market volatility creates a high-risk environment for AI-exposed investments.

1. European AI Stock Performance:
   Monitor ASML, SAP, and other European technology leaders for continued weakness
2. Semiconductor Supply Chain:
   Track European companies in the AI chip supply chain beyond ASML
3. Institutional Flow Data:
   Watch for signs of institutional investor rotation away from AI-exposed European stocks
4. Cross-Market Correlation:
   Monitor how US AI valuation trends continue to affect European markets
5. Regulatory Developments:
   Watch for European AI policy developments that could impact company valuations

The AI valuation correction has impacted global markets, with US technology stocks leading the decline (Nasdaq -1.74%, Technology sector -1.58%) and European markets showing more moderate but significant reactions (ASML -1.39%, SAP -2.75%) [0][5].

Extreme valuation multiples, particularly Palantir’s 700x earnings ratio [3], have triggered investor skepticism and institutional positioning against AI stocks, with veteran investors like Mark Mobius warning of “a lot of froth” in the AI space [4].

Approximately $500 billion has been wiped from semiconductor valuations globally [2], demonstrating the broader economic implications of the AI valuation correction beyond pure-play AI companies.

European markets are not immune to AI valuation concerns, with supply chain companies like ASML and enterprise software leaders like SAP experiencing direct impact, suggesting the correction affects the entire AI ecosystem rather than just end-user AI companies.