European stocks rose on Friday as global markets attempted to recover from a technology-led selloff that exposed growing investor concerns about the cost of financing the artificial intelligence boom, the sustainability of corporate profits and the prospect of higher US interest rates.

The rebound followed a turbulent week in which stronger-than-expected US inflation data intensified expectations of further monetary tightening, while mounting concerns about debt-financed investment in AI infrastructure weighed on technology and semiconductor stocks. Although European equities recovered some ground, the broader market remained on course for a weekly decline, suggesting investors were still cautious about the durability of the AI-driven rally.

At 10:55 GMT, the MSCI World Equity Index was up 0.4% but remained set for a weekly loss. Europe's STOXX 600 advanced 0.6%, Germany's DAX rose approximately 1%, and France's CAC 40 gained 0.5%. London's FTSE 100 was up less than 0.1%.

US stock futures also pointed to a modest recovery, with S&P 500 futures rising 0.2%. Nasdaq futures, however, remained in negative territory as investors continued to reassess the financial risks associated with the AI investment cycle, particularly among heavily indebted data-center operators.

The divergent performance between broader US equity futures and the technology-heavy Nasdaq highlighted a central concern facing markets: investors are increasingly questioning whether the revenue and profits generated by AI will justify the enormous capital expenditure required to build the infrastructure supporting the technology.

Amelie Derambure, a senior multi-asset portfolio manager at Amundi in Paris, said the ability of AI companies to translate investment into sustainable earnings remained unresolved.

"The question of monetization to me is still the big question that is not fully answered. There are still some doubts about the sustainability of the profits and the margins from some actors in the sector," Derambure said.

Despite those concerns, she said she remained overweight US equities, expecting strong corporate earnings to limit the extent of any market correction.

Her position captures the tension driving investor sentiment. Expectations of robust earnings continue to support equities, but rising financing costs and questions about AI profitability are making investors more selective about which companies can sustain their valuations.

The week's selloff reflected growing unease about the financing structure behind the AI boom, particularly the reliance on borrowing to fund data centers and other computing infrastructure.

Companies are committing substantial sums to servers, advanced chips, power supplies and data-center capacity in anticipation of continued demand for AI services. Yet the returns on these investments remain uncertain, with the pace of monetization varying across the industry.

That gap between immediate capital spending and the eventual generation of cash flows has become necessary as interest-rate expectations rise. Higher borrowing costs can increase the expense of financing infrastructure, weaken the economics of projects dependent on future demand, and put pressure on valuations that assume sustained growth over many years.

CoreWeave, a major provider of AI computing infrastructure, emerged as a focal point for those concerns. Its heavily indebted business model has drawn scrutiny as investors assess the credit risks associated with the rapid expansion of AI computing capacity. Concerns surrounding companies such as CoreWeave contributed to Thursday's market selloff.

The implications extend beyond individual technology stocks. If investors become less willing to finance data-center expansion on existing terms, companies across the AI supply chain could face higher capital costs or more demanding conditions for raising funds. That could affect infrastructure developers, chip suppliers and technology companies relying on continued expansion in computing capacity.

The market's reaction also suggests that strong demand for AI technology may no longer be sufficient on its own to support valuations. Investors now want evidence that spending will translate into durable revenue, healthy margins and cash generation rather than a prolonged cycle of investment financed by debt.

Monetary policy has added another source of uncertainty. Stronger-than-expected US inflation data released on Wednesday prompted traders to increase bets on further Federal Reserve rate hikes. The prospect of tighter policy has weighed on risk assets by raising the potential cost of capital and challenging valuations built around expectations of lower interest rates.

The resulting shift in sentiment has encouraged investors to reduce exposure to some technology shares while seeking protection in government bonds. That rotation helped stabilize fixed-income markets on Friday, even as equities remained vulnerable to renewed selling.

Dollar Weakens As Government Bonds Regain Safe-Haven Appeal

The US dollar fell as lower Treasury yields reduced its appeal, putting the currency on track for its first weekly decline after three consecutive weeks of gains. The dollar index dropped 0.4% to 101.65. The euro rose 0.4% to $1.1257, recovering from a recent 17-month low as the dollar weakened.

The currency movement underpinned how concerns about the AI trade and changing expectations for US monetary policy were influencing broader financial markets. Analysts said further deterioration in sentiment around AI companies could put additional pressure on the dollar.

Government bonds also recovered some of their safe-haven appeal as investors sought assets perceived as less exposed to corporate financing risks. European government bond yields edged higher on Friday, with Germany's 10-year yield at 3.4355%, but yields remained lower over the week.

Government bond markets across the Group of Seven advanced economies were on course for their strongest weekly performance since late May, reflecting demand for fixed-income assets during the equity market turbulence.

The relationship between German government bond yields and the STOXX 600 also turned positive during the week for the first time since August. The shift suggests government debt is regaining some of its defensive appeal, although one week's price movements do not establish a lasting change in market behavior.

That relationship had weakened earlier in the year amid concerns that the war in Iran could drive energy prices higher, fuel inflation and force central banks to maintain restrictive monetary policies for longer. The latest market moves show investors balancing those inflation risks against concerns about corporate credit and the sustainability of technology-sector investment.

Asian markets mostly advanced on Friday as investors reversed some of the previous session's moves. However, the recovery was uneven, with Indonesia and Turkey experiencing sharp declines following decisions by index provider MSCI.

Indonesian equities suffered their largest drop since 1998 after MSCI said the country's market no longer merited emerging-market status and outlined plans to remove it from key indexes tracked by investment funds. Turkey's main stock index fell more than 3% after MSCI froze certain changes to its Turkish equity indexes.

The developments underscored how index classifications and changes to benchmark composition can influence capital flows, particularly in markets that depend on foreign portfolio investment. The Indonesian selloff also introduced a separate source of pressure into an otherwise broad regional recovery.

Oil and Gold

Commodity markets remained sensitive to developments in the Middle East and movements in the dollar. Brent crude futures traded at $106.14 a barrel and remained on course for a weekly gain as concerns about supply disruptions persisted. Attacks around the Strait of Hormuz had intensified over the preceding 10 days, raising concerns about the security of a critical route for global oil shipments.

Elevated oil prices pose a potential complication for central banks already confronting inflation uncertainty. A sustained rise in energy costs could push headline inflation higher, limit the scope for interest-rate cuts and increase pressure on consumers and businesses. That would make it more difficult for equity markets to recover if financing costs remain elevated.

Gold, meanwhile, rose to approximately $4,174.52 an ounce, supported by the weaker dollar. The metal's performance reflected demand for an alternative store of value amid uncertainty over interest rates, geopolitical developments and financial-market stability.

The broader outlook remains unsettled. Friday's gains indicate that investors were willing to buy into some of the week's declines, but the weakness in Nasdaq futures and continued concerns about AI-related credit exposure indicate that confidence has not fully recovered.

For equities to regain sustained momentum, analysts say investors will likely need clearer evidence that AI investment can generate returns commensurate with its financing costs. Strong earnings could cushion the market against a deeper correction, as Derambure expects, but higher interest rates and mounting debt obligations could expose companies whose valuations depend on growth arriving faster than cash flows can support.