Stock markets are at record highs, and a lot of that money is flowing into AI. On Monday, Aug 18, 2026, economists at the European Central Bank published a blog post with a warning for anyone riding the wave.
"Economic research on past technological revolutions points to a worrisome conclusion: a correction of current stock market valuations is likely," they wrote.
The central bank isn't saying AI is a fake. It is saying the pattern looks familiar.
The economists point to the railway mania of the 1840s, the electrification and radio boom of the 1920s, and the internet bubble of the late 1990s. In each instance, the underlying technology transformed industries and boosted productivity, but stock prices eventually outpaced actual earnings growth. When reality set in, markets corrected sharply, and sometimes the downturn spilled into the broader economy. The central bank's analysis suggests that AI, despite its potential, may follow a similar trajectory.
The economists studied the 19th-century railway boom, the spread of electricity and radio during the 1920s, and the internet rise of the 1990s. In each case, the technology changed the economy, and in each case markets spent time running ahead of what was real.
They lay out two paths to a pullback.
The first is the classic bubble. "Overconfident, overoptimistic investors" push stock prices above true value, and then a shift in sentiment triggers a crash.
The second path is harder to see. Even if AI is as valuable as investors think, the economy could still get hurt. "As adoption spreads...uncertainty becomes economy-wide. If something then goes wrong with that technology, the whole economy suffers."
With so much of the economy tied to one technology, investors want a bigger cushion for taking risk. That cushion is called a risk premium, and the economists argue it will push prices lower over time even if company profits stay strong.
The post doesn't predict a date. It says "The exact timing is unknowable in advance. These boom-bust patterns are only identifiable with hindsight."
It also says both scenarios point to a boom followed by a correction, possibly followed by recovery and more gains. "Unlike in the dot-com episode, today's starting point leaves markedly less room to cut interest rates or use fiscal policy to cushion the fallout."
That's where the warning gets personal. Everyday investors have significant exposure to the Magnificent 7 without necessarily knowing it, because those stocks dominate global indexes and pension funds.
A sharp correction could trigger cascading effects through fund structures, and the economists say that could threaten financial stability.