European Markets Decline Amid Persistent AI Valuation Concerns and Varied Earnings Reports
## European Markets Conclude Week Lower Amid AI Valuation Scrutiny
European markets extended losses on Friday, with major indices closing lower for a second consecutive session. Investor sentiment was predominantly shaped by persistent concerns over elevated valuations within the artificial intelligence sector, coupled with a series of diverse corporate earnings reports and economic data releases.
## Market Performance Across Europe
The **pan-European Stoxx 600 index** declined by **0.7%**. Across key regional markets, the **U.K.'s FTSE 100** ended the day down **0.42%**. Both **Germany's DAX** and **France's CAC 40** experienced more significant drops, closing lower by **1.31%** and **1.36%**, respectively. **Switzerland's SMI** also registered a loss of **0.52%**. This broad-based decline reflected a cautious mood among investors, influenced by earlier weakness in Wall Street stemming from similar tech valuation concerns.
Individual stock movements presented a mixed picture. In the German market, **SAP** (SAP), and **Deutsche Boerse** (DB1) saw declines ranging from **4.1% to 4.6%**. **Brenntag** (BNR) closed lower by **3%**. Other notable decliners included **Siemens Energy** (ENR), **Qiagen** (QGEN), **Gea Group** (G1A), **BMW** (BMW), **Daimler Truck Holding** (DTG), **Siemens Healthineers** (SHL), **Siemens** (SIE), **Infineon** (IFX), **Deutsche Bank** (DBK), and **Porsche Automobil** (PAH3), all shedding between **1% and 2.3%**. **Commerzbank** (CBK) also drifted lower after its third-quarter results fell short of analysts' estimates.
Conversely, some companies reported strong gains. **Deutsche Post** (DPW) surged more than **8%** following higher earnings in the third quarter, with profit before income taxes rising to €1.269 billion from €1.158 billion year-over-year. Online fashion retailer **Zalando** (ZALG) climbed more than **7%** on strong results, attributed in part to its acquisition of rival About You.
## Artificial Intelligence Valuations Under Scrutiny
A significant driver of the market's cautious tone was the re-ignition of "AI bubble fears" among global investors. Warnings from prominent financial leaders underscored concerns about stretched valuations in the technology sector, which has been a primary engine of market gains over the past two years.
**Rightmove PLC** (RMG), the U.K.-based property portal, experienced a sharp decline, with its shares sinking over **25%** on Friday. The company projected slower profit growth for 2026, citing increased investment in artificial intelligence capabilities. **Rightmove** stated an incremental profit and loss investment of approximately £12 million and an additional £6 million in capitalized spending for future technology and AI development, which implies a **4-6% downgrade to consensus operating profit**. Chief Executive Johan Svanstrom emphasized, "AI is now becoming absolutely central to how we run our business and plan for the future." This move highlighted the immediate financial impact of substantial AI investment on a company's near-term profitability outlook.
In contrast to the broader cautious sentiment, **ITV** (ITV) shares soared **16.6%**. The U.K. broadcaster confirmed it was in preliminary talks to sell its broadcasting arm to Comcast, the parent company of Sky, in a deal reportedly valued at £1.6 billion. This potential acquisition, which could give Comcast significant control over the U.K. TV ad sales market, provided a substantial boost to **ITV's** stock.
Meanwhile, **Novo Nordisk** (NVO) shares fell **5.1%** after the Danish drugmaker, along with U.S. rival **Eli Lilly** (LLY), agreed to lower prices for their GLP-1 weight-loss drugs with the U.S. government. The agreement is expected to reduce monthly prices for U.S. government programs and cash payers to between $149 and $350, down from current ranges of $500 to $1,000. While analysts anticipate a near-term headwind on revenue, the move may boost volumes in the medium to long term.
## Broader Context: Tech Bubble Fears and Divergent Central Bank Policies
The sharp retreat in artificial intelligence stocks this week has intensified discussions around potential overvaluation in the tech sector. **Goldman Sachs CEO David Solomon** recently warned investors of a "likely" **10-20%** equity market correction within the next two years. Similarly, **Bank of England Governor Andrew Bailey** issued direct warnings about AI bubble risks, suggesting that the "very positive productivity contribution" from tech companies could be jeopardized by uncertainty surrounding future earnings.
Specific AI-related stocks have shown vulnerability. Companies such as **Palantir Technologies** (PLTR), despite raising revenue outlooks, have faced declines due to "eye-watering" forward P/E ratios exceeding **700**. While essential to AI infrastructure, **Nvidia** (NVDA) and **Advanced Micro Devices** (AMD) also possess P/E ratios significantly above market averages, making them susceptible to corrections if growth projections falter. The "Magnificent Seven" AI-related stocks—**Nvidia** (NVDA), **Amazon** (AMZN), **Apple** (AAPL), **Microsoft** (MSFT), **Tesla** (TSLA), **Alphabet** (GOOGL), and **Meta Platforms** (META)—experienced one-day falls in early November 2025, underscoring broad pressure on the sector.
Adding another layer of complexity to the global financial landscape is the divergence in monetary policies between leading central banks. While the **U.S. Federal Reserve** has been engaged in a rate-cutting cycle, signaling a pivot towards looser monetary conditions with its benchmark federal funds rate at **3.75%-4.00%**, the **European Central Bank** (ECB) has maintained a data-dependent holding pattern. This policy schism is influencing capital flows and dictating sector performance, contributing to the varied market reactions observed.
## Expert Perspectives on AI Valuations
> "The very positive productivity contribution from tech companies could be derailed by uncertainty around future earnings."
> — **Andrew Bailey, Governor, Bank of England**
> "There's a likely 10-20% equity market correction sometime in the next two years."
> — **David Solomon, CEO, Goldman Sachs**
These comments reflect a growing sentiment among financial leaders that while AI's potential is significant, current valuations may not be fully justified by concrete, near-term earnings, particularly as investors shift their focus from "expectation" to "evidence."
## Looking Ahead
The coming weeks will likely see continued scrutiny of AI-related valuations, with investor focus shifting towards companies that can demonstrate tangible returns on their AI investments. Further corporate earnings reports will provide more clarity on specific sector and company performance. The ongoing divergence in monetary policies between the U.S. Federal Reserve and the European Central Bank will also remain a key factor, influencing capital flows and overall market stability. Investors will be closely watching for any new economic data or central bank communications that could signal shifts in monetary policy or provide clearer guidance on the global economic outlook.
