Singapore’s central bank flags ‘stretched valuations’ in tech and AI stocks

Singapore’s central bank has joined a growing list of authorities calling out how expensive tech and AI stocks have become.

The Monetary Authority of Singapore (MAS) released its annual Financial Stability Review on Wednesday said “some equity markets are seeing relatively stretched valuations, particularly in the technology and artificial intelligence segments.”

The report said a “retrenchment of optimism in AI’s ability to generate sufficient future returns may lead to sharp corrections in the broader equity market and further defaults in the private credit market.”

This comes after a global selloff hit the semiconductor sector this week. About $500 billion in market value was erased after investors reacted to weaker earnings guidance from Palantir Technologies and Advanced Micro Devices.

Many investors have piled into AI-linked stocks expecting big future profits, and MAS is basically saying: calm down. The central bank pointed out that a large share of recent market gains has come from valuation expansion rather than profit growth.

A Bloomberg index of 45 major cloud, semiconductor, and hardware firms is now trading at around 23 times forward earnings, up from 14 times in April, while actual earnings estimates rose only 13%. That gap is doing a lot of the talking.

Central bank flags growing risks across credit and sovereign debt

MAS also said the rebound in equities this year, combined with rising gold prices and unusual movements in the dollar, reflects nerves under the surface. It stated that “the continued divergence between equity market valuations and rising downside risks to growth raises the prospects of disorderly corrections in the event of shocks.”

In plain terms: markets are acting confident even while economic risks are stacking up. The report also called attention to rising dangers in the sovereign bond world as governments take on more debt. Fiscal sustainability is now a concern in multiple regions.

The central bank also noted recent “prominent credit losses involving private credit funds.” These incidents show early signs that corporate credit risks are increasing. If credit conditions worsen, corporate bond spreads could widen after staying historically low for a long time.

Governments trying to manage borrowing costs have also shifted toward issuing more short-term debt. This move keeps financing cheaper for now but forces more frequent refinancing.

That increases rollover risk. MAS warned that these pressures raise the possibility of “fiscal dominance,” where governments lean on central banks to allow easier monetary conditions, higher inflation, or weaker currencies to soften debt burdens.

The report also touched on Singapore’s own housing market. MAS said the government will remain alert to property dynamics, especially because more accommodative domestic interest rates could lift sentiment and demand. It said Singapore will ensure a “stable and sustainable private housing market.”

Market declines spread across Europe, the U.S., and Asia

The reaction to stretched tech valuations is not limited to Singapore. European markets opened in the red on Wednesday.

The Stoxx 600 index was down 0.4% in early trade. The U.K.’s FTSE slipped 0.1%. Germany’s DAX fell 0.7%. France’s CAC 40 dropped 0.4%. Italy’s FTSE MIB slid 0.3%. Tech names were the main drag, with the Stoxx 600 Europe Technology Index down 1.2% after the U.S. tech sector selloff.

Sentiment was also weak in the U.S. and Asia. Futures tied to the Nasdaq fell nearly 0.4%. Japan’s Nikkei 225 dropped below 50,000 as investors pulled back from AI-linked stocks. In the prior session, the S&P 500 fell 1.2%, the Nasdaq Composite dropped 2%, and the Dow Jones Industrial Average lost 251 points or 0.5%.

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