Strong bank earnings in North America and Europe contrast with growing investor concerns about 2027.
Despite strong earnings and healthy credit markets, bank investors are increasingly concerned about the sector’s 2027 outlook.
JPMorgan Chase & Co., Bank of America Corp., Citigroup Inc., Morgan Stanley, UBS Group AG, HSBC Holdings, and Deutsche Bank AG have cited macroeconomic volatility and political uncertainty.
While profits at nearly all these banks are up from a year ago, doubts are emerging about the payoff from tens of billions of dollars in data center financing and about the prospect of further interest rate hikes.
A year ago, investors were more optimistic about the sector ahead of the Federal Reserve’s December 2025 interest rate cut. Data center spending was viewed as a growth opportunity, but it is increasingly seen as a potential risk if investments in AI fail to deliver expected returns.
On the plus side, yields on 10-year U.S. Treasury notes fell below 5% in recent weeks after exceeding that level in the third quarter, and the Fed held interest rates steady at its October meeting. Banks continue to benefit from robust economic activity, active dealmaking and strong wealth management businesses.
“It is a very, very favorable environment for banks,” said Ian Lapey, manager of the Gabelli Global Financial Services Fund (GFSIX), which holds several U.S. banks, including First Citizens BancShares Inc. and Citigroup Inc., as well as European banks such as Barclays, Banco Bilbao Vizcaya Argentaria S.A. (BBVA), ING Groep N.V., Banco Santander and Société Générale.
“You’re seeing strong revenue growth across the board, including fee income, investment banking revenues, advisory revenues, and net interest income, which is also growing,” Lapey said. “The credit environment has been really benign for several years.”
Most banks are also buying back stock, a sign of confidence in the economy. Employment levels and consumer spending in the U.S. have remained resilient despite frustration over rising living costs.
Lapey said banks face a more challenging environment in 2027 as revenue growth normalizes and risks associated with certain types of debt rise. Potential cracks in credit quality could emerge, especially for U.S. banks, amid concerns about data center financing and exposure to private credit, he said.
While U.S. banks have greater exposure to private credit and AI data-center financing, European banks are better positioned to generate cash, repurchase shares, and increase dividends, he said.
Among the banks’ forecasts, UBS expects “a more typical sequential seasonal moderation in transaction volumes” in the coming year, and its current global banking pipeline is expected to help it increase revenue sequentially, assuming constructive markets.
JPMorgan Chase, which raised its net interest income outlook, said it expects “pretty stable” corporate credit conditions.
“Obviously, there are issues out there, and we’ll have to see how they flow through — the performance of our borrowers, energy prices, fuel inputs, and higher rates. These are all things that will create challenges in different pockets of the economy,” JPMorgan Chase CFO Jeremy Barnum said on the bank’s call with analysts. “It’s very early, obviously, but in general, we think corporate balance sheets are in quite good shape. There’s been resilience, but there are a lot of pressures building up. So, we’ll have to see what happens.”
Such uncertainty has weighed on bank stock sentiment, prompting investors to react more negatively to results that fall short of expectations.
NatWest shares fell nearly 9% on Oct. 30 after the bank reported nearly a 100% increase in impairment charges, which bit into profits.
“This is sort of a classic Wall Street overreaction,” Lapey said. “They actually put up a return on tangible equity of 21.6%, which makes them among the most profitable banks in the world. I’d say the outlook for that company is quite good.”
Ian Lapey of Gabelli Funds says banks’ Q3 results revealed solid businesses, but the sector could face more headwinds next year.
Steve Gelsi is a contributing writer based in the U.S.
Shares in artificial intelligence and technology firms have been climbing following an enormous sell-off that wiped trillions of dollars off stock values.
The tech-heavy Nasdaq stock index opened higher following a market rout that began in the US on Thursday before spilling over to Asian and European markets into Friday.
Investors had been selling off tech shares in part due to concerns the Democrat victory in the midterm elections would mean slower artificial intelligence development.
However the latest US employment figures added to a mixed picture for American markets on Friday morning, with an unexpectedly strong 165,000 jobs added to the economy in September.
On Thursday, businesses closely linked to artificial intelligence development took a hammering on stock markets, particularly chip and semiconductor makers.
But the Nasdaq Composite opened up on Friday and flattened out around 1.7% higher by lunchtime, reversing some of its 5.5% fall.
The S&P 500, which tracks the share prices of the largest publicly-traded US companies, was around 0.9% higher by lunchtime. The Dow Jones Industrial Average opened a little down before nudging into positive territory.
Nvidia, which shed hundreds of billions in market value on Thursday after shares slid more than 9%, began Friday up more than 6% but settled around 4% higher as trading continued.
SpaceX and Tesla shares, which were also hammered on Thursday, saw more mixed gains, up more than 6% and nearly 5% respectively.
Chipmakers AMD and Micron both dropped by more than 17% on Thursday, but AMD shares had risen by about 12% on Friday while Micron was up more than 8%.
However, stock markets in Asia and Europe fared worse on Friday.
The Kospi in South Korea closed down 6% on Friday, with shares in chipmaker SK Hynix plunging more than 10%. European markets also fell, with the main indexes in Germany, France and Spain ending the day down.
In the UK, the FTSE 100, which tracks the largest companies on the London Stock Exchange, declined 1.01%.
In addition to the recent market volatility, UK traders were also digesting the latest Bank of England decision to raise interest rates and the signal that another rate rise could be on the cards to curb rising prices.
Dan Coatsworth, head of markets at AJ Bell, said it had been a brutal week for markets, and the key question was whether the jump in the S&P 500 and Nasdaq would be sustained.
“While no-one knows what happens next, it’s clear that we’ve just seen a significant shift in market sentiment,” he said.
“Once investors have had the weekend to catch their breath, next week could give a clearer indication of whether the tech trade is going down the pan or fighting back.”
US stocks have continued to slide as concerns continue to intensify over the increasing costs of the artificial intelligence (AI) build out.
Shares in Intel continued their overnight slide into early trading on Friday, falling as much as 30% after the chip maker warned of a weaker computer market even as it plans to increase spending on AI.
Amazon shares fell as far as 6% before recovering after its reported earnings on Thursday evening fell short of investors’ expectations.
The tech-heavy Nasdaq stock exchange opened on Friday at its lowest level in more than two months, down 2.5%, as other tech stocks including Reddit and Roblox continued to fall.
The losses follow the value of Google owner Alphabet plunging by more than $500bn on Thursday after it revealed its own AI summaries were affecting its core search advertising revenue.
Alphabet stock continued to fall in early trading, down 1% after Thursday’s massive slide.
The bigger losses on Friday were elsewhere, with Intel on track to lose more than $130bn in value after its earnings update rattled investors.
On Thursday, Intel’s finance chief David Zinsner said the firm did not expect positive cash flow this year, and forecast lower-than-expected revenue for its fourth quarter.
“Looking ahead, we see the PC slowdown continuing at least through the first half of next year,” he said in the chip maker’s third quarter earnings report.
In the earnings call, he said the firm had significantly ramped up investment in equipment in the third quarter and expected that to be “even more significant” in the following three months.
sankai/E+ via Getty Images
Memory and AI-related stocks rose in premarket trading Wednesday after SK Hynix (SKHY) reported a record quarterly profit that sharply beat estimates and announced more than $25B in dividends and share buybacks.
SK Hynix shares surged 10.8% in South Korea and
Gains and losses were shaped by quarterly earnings, technical momentum (for CSGP), sector-specific news such as SpaceX’s interest in cell sites (boosting CCI), and factors like changes in investment guidance (pressuring BNL) or reduced revenue from amortization (impacting CCI).
Tech-heavy Nasdaq falls 2.6 percent as debate rages over whether AI is a bubble.
Published On 23 Oct 202623 Oct 2026
US tech stocks have dropped sharply amid market jitters over the sustainability of companies’ enormous capital investments in AI.
The Nasdaq Composite, which is dominated by tech firms linked to the AI boom, fell 2.6 percent on Thursday, its steepest fall since the index tumbled 4.2 percent on June 5.
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The broader S&P 500 slid 1.21 percent, the benchmark’s biggest drop since a 1.52 percent decline on July 29.
Apart from Apple, each of the “Magnificent 7”, which make up more than one-third of the overall market, saw substantial losses.
Meta dropped nearly 7 percent after it raised its projected capital spending for this year to $135bn to $145bn in its latest earnings report, even as the Facebook parent company’s net profit fell short of expectations.
Amazon fell 4.6 percent, while Nvidia dropped 4.4 percent.
Tesla and Alphabet both fell 3.1 percent, while Microsoft declined 2.2 percent.
Apple rose 1.2 percent.
The sell-off extended to other major tech players, including Intel and Advanced Micro Devices, both of which fell about 8 percent, and Broadcom, which slid 4.3 percent.
Rising oil prices since February, due to the fallout of the US-Israel war on Iran, added to the downbeat mood.
Brent crude futures rose 4 percent on Thursday and continued to climb on Friday morning, taking the international benchmark above $114.20 a barrel, its highest since May.
Major stock markets in Asia opened lower on Friday, following the losses on Wall Street.
Japan’s benchmark Nikkei 225 fell more than 2 percent in morning trading before recovering some ground, while South Korea’s KOSPI dropped as much as 3.5 percent.
The Hang Seng Index in Hong Kong fell about 0.5 percent.
Jay Goldberg, a senior analyst at Seaport Research Partners in San Francisco, said the swings in the market appeared to be driven more by sentiment than underlying fundamentals.
“In short, nothing has changed. Investors have just decided to be afraid this week. Everyone I speak to points to a different cause for the downfall … It’s just a giant wall of worry,” Goldberg told Al Jazeera.
“There are legitimate concerns about the AI trade, but this level of shift in the markets is driven much more by investor sentiment than any tangible reason.”
US tech companies’ huge investments in AI have stoked intense debate about whether a market bubble is forming similar to the one that preceded the 2000 dot-com crash.
While some Wall Street analysts view current levels of investment in datacentres and graphics processing units as unsustainable, others argue that AI will revolutionise society to a degree that justifies the eye-watering sums involved.
Global AI investment is forecast to reach $2.7 trillion in 2026 and $3.6 trillion in 2027, according to technology insights company Gartner.
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