This week’s equity market wobble, which saw a retreat in U.S. artificial intelligence-related stocks amid ongoing concerns over stretched valuations, has thrust contagion fears into the spotlight for global investors.

Goldman Sachs CEO David Solomon warned this week of a “likely” 10-20% drawdown in equity markets at some point within the next two years, while the International Monetary Fund and the Bank of England have both sounded the alarm bells.

Bank of England Governor Andrew Bailey highlighted the possibilities of an AI bubble in an interview with CNBC on Thursday, noting that the “very positive productivity contribution” from technology companies could be offset by uncertainty around future earning steams in the sector.

“We have to be very alert to these risks,” Bailey said.

Legrand is one of several European companies which is benefitting from the AI boom. The French company, which sells products to Alphabet, Amazon and others to help cool servers, has seen its shares surge 37% this year, roughly as much as Nvidia.

Anders Danielsson, CEO of Swedish construction group Skanska, which builds data centers and other AI infrastructure assets, shrugged off concerns about a slowdown.

“In the U.S. we have a very strong pipeline of data centers — we don’t see any slowdown there,” he told CNBC. “We are working with large international customers and they are also interested in building data centers in central Europe, and in the Nordics and the U.K. We haven’t seen any slowdown really.”

Meanwhile Kiran Ganesh, multi-asset strategist at UBS, highlighted a notable lack of volatility, adding that the broader narrative remains positive.

“We’ve had a remarkably smooth rally given the scale of investment that’s taken place, given the uncertainty about future cash flows, and given some of those concerns about valuation,” Ganesh told CNBC’s “Europe Early Edition” on Friday.

“As we’ve gone through earnings season, I think it’s reasonable to have expected some volatility, but actually when we look at the results, and they have been reassuring, we’re still up over the course of earnings season and they have been beating expectations. So although some volatility has been materializing this week, we think that’s to be expected and the bigger picture still remains positive.”

Still, many investors appear to be souring on the increasingly-stretched valuations.

In Asia, shares of SoftBank Group — which is active across AI infrastructure, semiconductor and application companies — have fallen sharply, with the Japanese group suffering almost $50 billion in weekly losses. SoftBank resumed its downward trajectory on Friday, after dropping about 10% on Wednesday.

On Tuesday, it emerged that Scion Asset Management, the hedge fund led by “The Big Short” investor Michael Burry, had built short positions against both Palantir Technologies and Nvidia, drawing the ire of Palantir CEO Alex Karp.

“Some big tech stocks are on sale, and are presenting buying opportunities for investors, especially for investors who have missed out on the market’s strength over the past two months,” said Glen Smith, chief investment officer at GDS Wealth Management.

Other investors have flagged concentration risk in U.S. equities, and advocate looking further afield.

Luca Paolini, chief strategist at Pictet Asset Management, said stretched valuations mean the firm is neutral on U.S. names. “Emerging markets are preferred, with diversified exposure across India, Brazil, and broader EM benefiting from AI-driven investment and monetary easing,” Paolini said in a market commentary.

With valuations in the U.S. stock market becoming increasingly stretched, the chief executive of Southeast Asia’s largest bank is warning investors to expect turbulence ahead.

“We’ve seen a lot of volatility in the markets. It could be equities, it could be rates, it could be foreign exchange,” DBS CEO Tan Su Shan told CNBC, adding that she expects that volatility to continue.

Tan, who took over the helm of DBS from longtime CEO Piyush Gupta in March, said that investors were particularly worried about the lofty valuations of artificial intelligence stocks, especially the so-called “Magnificent Seven.”

The Magnificent Seven — Amazon, Alphabet, Meta, Apple, Microsoft, Nvidia and Tesla — are some of the major U.S. tech and growth stocks that have driven much of Wall Street’s gains in recent years.

“You’ve got trillions of dollars tied up in seven stocks, for example. So it’s inevitable, with that kind of concentration, that there will be a worry about. ‘You know, when will this bubble burst?'”

Earlier this week, at the Global Financial Leaders’ Investment Summit in Hong Kong,  it was likely there would be a 10%-20% drawdown over the next 12 to 24 months.

Morgan Stanley CEO Ted Pick said at the same summit that investors should welcome periodic pullbacks, calling them healthy developments rather than signs of crisis.

Tan agreed. “Frankly, a correction will be healthy,” she said.

Recent examples include Advanced Micro Devices and Palantir, both of which posted stronger-than-expected quarterly results on Tuesday, yet their shares — and the wider Nasdaq — fell.

Her remarks follow similar warnings by the International Monetary Fund and central bank chiefs Jerome Powell and Andrew Bailey, who have all cautioned about inflated stock prices.

Tesla CEO Elon Musk says the company will likely need to build a “gigantic” semiconductor fabrication plant to keep up with its artificial intelligence and robotics ambitions.

“One of the things I’m trying to figure out is — how do we make enough chips?” Musk said at Tesla’s annual shareholders meeting Thursday.

Tesla currently relies on contract chipmakers Taiwan Semiconductor Manufacturing Company and Samsung Electronics to produce its chip designs. Musk said he was also considering working with U.S. chip company Intel. 

“But even when we extrapolate the best-case scenario for chip production from our suppliers, it’s still not enough,” he said.

Tesla would probably need to build a “gigantic”  chip fab, which Musk described as a “Tesla terra fab.” “I can’t see any other way to get to the volume of chips that we’re looking for.” 

Microchips are the brains that power almost all modern technologies, including everything from consumer electronics like smartphones to massive data centers, and demand for them has been surging amid the AI boom.

Tech giants, including Tesla, have been clamoring for more supply from chipmakers like TSMC — the world’s largest and most advanced chipmaker. 

According to Musk, Tesla’s potential fab’s initial capacity would reach 100,000 wafer starts per month and eventually scale up to 1 million. In the semiconductor industry, wafer starts per month is a measure of how many new chips a fab produces each month.

For comparison, TSMC says its annual wafer production capacity reached 17 million in 2024, or around 1.42 million wafer starts per month.

While Tesla doesn’t yet manufacture its own microchips, the company has been designing custom chips for autonomous driving for several years.

It is currently outsourcing production of its latest-generation “AI5” chip, which Musk said will be cheaper, power-efficient, and optimized for Tesla’s AI software.

The CEO also announced on Thursday that Tesla will begin producing its Cybercab — an autonomous electric vehicle with no pedals or steering wheel — in April.

Musk’s statements underscore Tesla’s shift into AI and robotics — industries the CEO sees as the future of the global economy. 

“With AI and robotics, you can actually increase the global economy by a factor of 10, or maybe 100. There’s not, like, an obvious limit,” Musk said at the shareholder meeting.