Capital Economics: Decline in Artificial Intelligence Stocks Will Have Relatively Less Impact on the British Market

According to Capital Economics, if stock prices in the artificial intelligence sector decline sharply, this impact would be less pronounced on the UK stock market compared to other leading markets. The main reason for this is the composition of British indices, where the share of technology companies is relatively small.

In the MSCI UK Index, technology and telecommunications companies currently account for only 3%. Before the "dot-com" crisis of 2000, their share was approximately 30%, which is why the decline at that time had a strong impact on the British market as well.

Capital Economics identifies two additional factors. Analysts suggest that even in the event of a sharp price correction in the artificial intelligence sector, the US economy would avoid recession, which would limit declines in global stock markets. Additionally, in such circumstances, a weakening of the dollar and a reduction in interest rates by the Federal Reserve are expected.

In recent periods, the growth of the FTSE 100 has also been supported by strong results in the energy and financial sectors. According to Capital Economics, the rapid growth in stock prices of artificial intelligence companies may slow down next year, and the current market decline could be the beginning of this process.

Source: Investing.com