ECB Chief Cites AI as Growth Catalyst Amid Rate Hold, Trade Risks

European Central Bank President Christine Lagarde said on Thursday that artificial intelligence is having a positive impact on Europe's economy. She highlighted that investment in AI has been a surprising upside factor for growth.

Lagarde emphasized the importance of both public and private sector spending on AI technologies.

The European Central Bank recently maintained its key interest rates, as global trade uncertainty and geopolitical tensions remain major concerns. Lagarde noted that while trade tensions have eased, the volatile international environment could still disrupt supply chains and dampen economic activity in the euro zone. She also pointed out that planned defense and infrastructure spending may help offset some of these challenges.

The comments come as central banks worldwide are closely monitoring the economic implications of AI. The U.S. Federal Reserve has acknowledged that AI will be transformative but has not yet taken a firm stance on its long-term effects. In Europe, the ECB is working to promote AI adoption while ensuring that its benefits are widely accessible.

AI Investment and Economic Resilience

Lagarde stressed that the ECB is observing a shift in how economies are evolving, with AI playing a key role. The European economy has shown resilience despite global headwinds, growing by 0.3% in the third quarter of 2025. This growth has been driven by stronger consumer spending and investment, including in AI-related sectors.

According to OECD Secretary General Mathias Cormann, AI expenditures have surged, helping to counter the negative effects of trade uncertainty. Both public and private sector investments are contributing to this trend, suggesting that AI is becoming a central driver of economic activity across Europe.

Lagarde noted, however, that it will take time to determine whether the impact of AI is sustainable. The ECB remains cautious, as inflation forecasts remain uncertain. While annual inflation in the euro zone has dropped to 2.1%, it is still higher than the ECB's long-term target. The central bank is carefully monitoring whether this trend will continue in the coming years.

Market Reactions and AI Stock Volatility

Meanwhile, AI stock C3.ai has experienced significant volatility. On December 16, 2025, the company's Chief Financial Officer, Lath Hitesh, sold 15,042 shares of Class A Common Stock for a total of $216,303. The sale was conducted at a weighted average price of $14.38 per share. Hitesh remains a 10% owner of the company and directly owns 223,120 shares following the transaction.

The stock's performance has been mixed in recent months. C3.ai's shares dropped by 55% in 2025, partly due to the unexpected departure of its founder and former CEO, Thomas Siebel, who stepped down in September for health reasons. The new CEO, Stephen Ehikian, has taken over and is expected to stabilize the company's operations. However, analysts are cautious about the stock's near-term prospects.

On December 18, 2025, C3.ai shares fell by 4.06% to $14.65, underperforming compared to its tech peers. Microsoft and Alphabet both saw smaller declines, with Microsoft down 0.78% and Alphabet down 0.39%. C3.ai is now trading at 66.96% below its 52-week high of $44.34, raising concerns among investors about its ability to regain momentum.

What Analysts Are Watching

Analysts are closely watching how C3.ai adjusts to its new leadership. The company provides AI-powered software applications to help businesses adopt AI more quickly and affordably. Despite its innovative offerings, C3.ai's revenue dropped by 20% in the first half of fiscal 2026, catching the team by surprise. This decline led to a significant loss, with the company reporting a GAAP net loss of $221.4 million during the period.

While the new CEO has experience in AI and enterprise software, it may take time for the company to return to growth. Analysts have a mixed outlook, with only two out of 16 recommending a buy for C3.ai stock. The average price target is $14.67, suggesting a potential 8% decline in the near term.

Investors are also watching the broader implications of AI on the economy. The ECB and other central banks are beginning to recognize AI's role in driving productivity and economic resilience. However, as Lagarde emphasized, the long-term effects remain uncertain, and the full impact of AI may take years to materialize.