The Bank of Spain has warned that artificial intelligence (AI) fever is overvaluing big tech companies on the stock market and could lead to a sharp fall in markets. In yours Autumn 2025 Financial Stability Reportthe supervisory authority underlines that, despite the apparent calm, there is a risk of “abrupt and intense corrections in valuations on the financial markets”.
“The risk assessment of the markets contrasts with the situation of uncertainty that we are experiencing. The markets give a low price to the risk. If you look at the situation of the stock markets, especially in the United States, in technology companies there are market segments in which the valuations are very high and this represents an element of risk or uncertainty”, explained the director general of Financial Stability, Daniel Pérez Cid, during the presentation of the report to the press.
The organization sees the euphoria that artificial intelligence has unleashed on the markets as one of the main causes of the current concentration of stock markets around the so-called magnificent seven (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla). “Elevated valuations stand out in stock markets, especially in the United States linked to the growth of the technology sector, where there is an increasing concentration of market capitalization,” the report reads. According to the Bank of Spain, this concentration “generates additional risks by increasing the likelihood that idiosyncratic shocks associated with its activity will have systemic effects”.
This warning adds to those already launched by other international organizations in recent weeks. The International Monetary Fund (IMF) has warned that US stock prices are trading 10% above what is reasonable. Last week, Bank of England governor Andrew Bailey said artificial intelligence was likely to be the next big technology driving the economy, but at the same time stressed that “we could have a bubble, because markets are pricing in the future flow of yields, and that is uncertain.” The Bank of England itself has already started investigating the exposure of British financial institutions to loans intended to finance data centers due to the possible effect of sharp market declines.
In it Financial Stability Reportthe Bank of Spain warns that market optimism is supported by profit expectations that may be excessive. “These companies have particularly high valuations based on significant expectations of growth in their profits. These could not be met if the risks associated with the progress and level of competition in technologies such as artificial intelligence materialize,” he concludes. The Bank of Spain recalls that these assessments are maintained in a context of low level of market volatility but high uncertainty about global economic policies and prospects. A combination that could amplify the impact of any correction. If they occur, “corrections could reach several market segments, including sovereign and corporate debt and equities.”
In any case, Pérez Cid assessed that the Spanish financial system is ready to face tensions. “In the resilience exercises, in the set of analyzes and market correction hypotheses, what it shows is the resilience capacity of the sector,” he explained. The report highlights that the position of households and businesses is solid, with debt levels low compared to the historical average. And the banking sector has strengthened its capital buffers over the past year. “The capital level of the Spanish banking sector provides considerable aggregate resilience in the face of different adverse scenarios,” the document reads.
Rule out a real estate bubble
One of the sections of the report that receives the most attention is the one that concerns the risks of the real estate sector. Although the Bank of Spain highlights the increase in real estate prices and reflects that the indicators are at similar levels to those of 2001 (the years before the outbreak of the financial crisis), the supervisory authority has ruled out a bubble.
“When we talk about a bubble it is because there is a very uncontrolled growth in demand, strong indebtedness and less than solid positions of families. The data says that we are not in a moment that can be characterized in this way. There is an increase in prices due to a supply that does not respond to all the demand. But we do not observe imbalances like those that existed at the beginning of the 2007 crisis”, explained Pérez Cid.
The director general stressed that, although house prices are increasing in some provinces, there is no general increase across Spain. Furthermore, households have a financial situation with low levels of debt and the standards for granting credit by banks remain strict, which reduces the vulnerability of the real estate sector. The loan-to-value ratio of the house is around 68%, clearly conservative levels compared to the historical highs before 2007. Factors that dispel fears of a real estate crisis.
Pérez Cid also recalled that the Bank of Spain is developing a theoretical framework to evaluate possible limits on the granting of mortgage loans. At the moment this framework is only in the planning and analysis phase, and does not imply the activation of specific measures. Its objective is to provide the supervisory authority with tools in the event of possible market tensions.
In addition to the risk of overvaluation on stock markets by technology companies, the Bank of Spain report highlights other risks such as the high level of public deficit in Spain and especially in France or the United States. Also the political environment, uncertainty and banking exposure to cryptocurrencies. “These assets continue to represent a small part of the financial markets, but there is an expectation of greater expansion and growing interconnectedness with the traditional financial sector,” he concludes.
In any case, the Bank of Spain underlines that the Spanish financial system has strengthened levels of capital and high resilience, capable of absorbing sudden corrections in the markets without compromising the overall stability of the sector.
