European stock markets have pulled back from their record highs, reflecting a shift in market sentiment towards artificial intelligence and technology stocks.

The STOXX Europe 600 index closed down 0.7%, erasing most of its gains for the week. Energy and retail sectors led the declines on Friday, while the technology sector extended its weekly loss to 3.9%, marking its largest drop since March.

Shares of Zalando SE fell as much as 11% on Friday before paring some of those losses. The decline followed the launch of an investigation by German financial regulators into the online fashion retailer's 2025 report, prompted by suspicions of accounting rule violations.

Global technology stocks experienced significant volatility throughout the week as investors questioned the high valuations of AI-related shares. Price increases by major companies such as Apple Inc. and Microsoft Corp. have also heightened concerns about inflation driven by artificial intelligence.

"Semiconductors remain the backbone of the AI-driven tech cycle, benefiting from strong structural demand. The recent volatility reflects a test of valuations, profit-taking, and flow-driven positioning adjustments amid rising interest rates, rather than a deterioration in fundamentals," said Christian Stocker, an equity strategist at UniCredit. "We view this as a temporary correction, with the long-term growth trend for AI remaining intact."