Europe has not been spared from the global tech rout. The Stoxx Europe 600 index, which tracks the continent’s largest companies, fell 1.8% on Tuesday, mirroring losses in Asia and the US. While Europe lacks the massive AI hyperscalers of Silicon Valley, its markets are deeply integrated into the global financial system, and the fear of a US-led recession or market crash is weighing heavily on sentiment.
The decline was broad-based but particularly hard on tech and industrial sectors. European tech firms, often suppliers to the US giants, are vulnerable to any cutbacks in AI infrastructure spending. If Klarna CEO Sebastian Siemiatkowski is right and the data center boom is a bubble, European chip equipment manufacturers and engineering firms will face order cancellations.
The UK market is also suffering, with the FTSE 100 down 1.3%. This marks the fourth consecutive day of losses, the worst run since April. The mood in London is grim, compounded by the $1 trillion crash in the crypto market, which has hit many younger investors and fintech firms based in the capital.
European investors are also grappling with their own monetary policy issues, but the direction is largely being set by the US Federal Reserve. The fading hopes for a US rate cut are strengthening the dollar and putting pressure on European assets. Additionally, the drop in gold prices signals a general withdrawal of liquidity that hurts all asset classes.
As the “irrationality” of the AI boom becomes a global talking point, European markets are likely to remain under pressure. The continent’s indices are often seen as value plays compared to the US, but in a global panic, correlations tend to converge to one. For now, Europe is trading in the shadow of the American tech bubble.
