The Spanish Central Bank has warned that the artificial intelligence (AI) fever is overvaluing the value of major technology companies on the stock market and could lead to a sudden decline in the markets. In your Fall 2025 Financial Stability ReportThe supervisor stresses that despite the apparent calm, there is a risk of “sudden and intense corrections in valuations in the financial markets.”
“The risk assessment of markets belies the uncertainty we are seeing. Markets put a low price on risk. When we look at the stock market situation, especially in the United States, in technology companies, there are sectors of the market where valuations are very high and that represents an element of risk or uncertainty,” Director General for Financial Stability, Daniel Pérez Cid, explained while presenting the report to the press.
The organization believes that the euphoria unleashed by artificial intelligence in the markets is one of the main reasons for the current stock market concentration around those known as the “magnificent seven” (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla). “In equity markets, high valuations stand out, especially in the United States associated with the rise of the technology sector, where there is an increasing concentration of market capitalization,” the report said. According to the Bank of Spain, this concentration “generates additional risks by increasing the probability of… Shocks The idiosyncratic influences associated with your work have systemic effects.
This warning is in addition to warnings already issued by other international organizations in recent weeks. The International Monetary Fund has warned that US stock prices are trading 10% above what is reasonable. Bank of England Governor Andrew Bailey said last week that artificial intelligence was likely to be the next big technology to drive the economy, but at the same time noted that “it is possible that we have a bubble, because markets are pricing in the flow of future returns, and that is uncertain.” The Bank of England itself has already begun investigating the exposure of British financial institutions to loans intended to finance data centers due to the potential impact of a sudden market decline, and the majority of fund managers are also concerned about the possibility of a bubble, which is a constant topic of discussion in financial circles.
In it Financial stability reportThe Spanish Central Bank warns that market optimism is supported by earnings expectations that may be excessive. He concludes: “These companies offer particularly high valuations based on significant growth expectations in their profits. These valuations cannot be met if the risks associated with the progress and level of competition in technologies such as artificial intelligence materialize.” The Bank of Spain notes that these assessments are maintained in an environment characterized by a low level of market volatility but high uncertainty about global economic policies and outlook. A combination that can amplify the effect of any correction. If they occur, corrections “may hit different sectors of the market, including sovereign debt, corporate debt and equities.”
In any case, Pérez Cid estimated that the Spanish financial system was prepared to face tensions. “In the resilience exercises, the set of analyzes and market correction assumptions, what emerges is the sector’s ability to be resilient,” he explained. The report highlights that the position of households and businesses is strong, with debt levels lower than the historical average. The banking sector strengthened its capital reserves last year. “The level of capital of the Spanish banking sector provides remarkable overall resilience in the face of various negative scenarios,” the document states.
Ruling out a real estate bubble
One of the sections of the report that has received the most attention is the section on real estate sector risks. Although the Bank of Spain highlights the rise in housing prices, and reflects that the indicators are at levels similar to those they were in 2001 (the years before the outbreak of the financial crisis), the supervisory authority ruled out the existence of a bubble.
Pérez Cid explained: “When we talk about a bubble, it is because there is a very uncontrolled growth in demand, strong indebtedness, and not very strong household situations. The data indicate that we are not in a moment that can be described in this way. There is an increase in prices due to supply that does not respond to all demand. But we do not observe imbalances like those that existed at the beginning of the 2007 crisis.”
The Director General stressed that although housing prices are rising in some provinces, there is no general increase across Spain. In addition, households have a financial position with low debt levels and credit granting standards by banks remain strict, which reduces the fragility of the real estate sector. The loan-to-home value ratio is about 68%, which is clearly prudent levels compared to its historical highs before 2007. These factors dampen fears of a housing crisis.
Pérez Cid also noted that the Bank of Spain is developing a theoretical framework to evaluate the potential limits of mortgage loan granting. Currently, this framework is only in the design and analysis phase, and does not entail the activation of specific measures. Its goal is to provide the supervisor with tools in the event of potential market tensions.
Aside from the risks of overvaluation of stock markets by technology companies, the Bank of Spain report highlights other risks such as the high level of public deficits in Spain, especially in France and the United States. As well as the political environment, uncertainty and banking exposure to crypto assets. “These assets still represent a small part of financial markets, but there are expectations of greater expansion and increased interconnection with the traditional financial sector,” he concludes.
In any case, the Bank of Spain highlights that the Spanish financial system has fostered capital levels and high flexibility, capable of absorbing sudden corrections in the markets without compromising the overall stability of the sector.
About The Author
