AI valuation worries and sticky inflation set a cautious tone for global markets

Global markets on Monday are likely to be driven by a cautious mood around expensive technology and AI-related stocks, persistent inflation pressures, and growing worries about credit conditions. First, investors are reassessing the entire AI and high‑growth tech theme after Nvidia’s recent earnings. While Nvidia remains a key player in AI, its results and guidance have prompted questions about whether the huge amounts of money being poured into AI infrastructure by major tech companies can generate profits quickly enough. This has led to a broader rethink of lofty valuations across the global tech sector, which is a major driver of indices in the U.S., Europe, and Asia. Slowing retail investor flows into AI leaders ahead of the report underline this more cautious stance, and any continued weakness in AI or semiconductor names could weigh on global equity benchmarks. Second, fresh inflation data are reinforcing the idea that price pressures are not fully under control. The latest Producer Price Index showed that business input costs, especially in services, have swung from falling earlier in the year to rising sharply, with increases of more than 7% in some measures. Companies are passing these higher costs on to retailers and wholesalers, raising concerns about profit margins and the potential for consumer prices to stay elevated. This complicates the outlook for central banks, particularly the Federal Reserve, by reducing the likelihood of rapid interest‑rate cuts. Higher‑for‑longer rates tend to pressure stock valuations worldwide, especially in rate‑sensitive sectors. Third, signs of credit stress and broad‑based selling late last week have put investors on alert. Rising funding costs and tighter financial conditions can hurt corporate borrowing and investment, which in turn can slow economic growth. The recent market pullback suggests that investors are becoming more sensitive to any hint of strain in credit markets, and this could keep risk appetite subdued on Monday. Looking ahead, traders are also positioning for the upcoming U.S. Consumer Price Index report in mid‑March, which is expected to show inflation still running above central bank targets. This anticipation may keep volatility elevated and limit aggressive buying, as global markets balance optimism about long‑term AI growth against near‑term risks from inflation and tighter financial conditions.