European automakers face a potential shake-out among Artificial Intelligence suppliers if the technology’s market bubble bursts, leaving those with weak partners exposed to higher costs and supply disruptions, analysts say.
Fears of an AI bubble burst have intensified following a sharp sell-off in late October and early November 2026. The tech-heavy Nasdaq 100 slid 1.4 percent on Nov 2, officially pushing the index into a technical correction, leaving it down more than 10 percent from its peak on Oct. 6.
The bubble may burst, but analysts say the strategic need for AI will not change, so the risk lies in whom automakers partner with and how efficiently they spend.
Several major European automakers have set up strategic partnerships with AI companies.
Mercedes-Benz partners with Liquid AI to scale intelligence for Mercedes’ models with third- and fourth-generation MBUX in North America. Stellantis works with Mistral AI to embed generative AI across operations. BMW Group’s partnership with Mistral AI uses AI in crash simulation.
Risk-averse companies could fall behind
If the bubble bursts, financially unstable tech companies might be wiped out, Pedro Pacheco, vice president of research at Gartner, said. This reinforces the importance for automakers to make considered choices about AI investments and partnerships, he said.
If an AI partner goes bankrupt, this can destabilize the market in terms of the supply of AI-related products and services, which could raise the cost of AI products and services for automakers.
“If you’re not efficient then you end up having spiraling costs and the benefit that you extract is basically limited in comparison to the costs,” Pacheco said.
Those automakers that are already focused on AI will continue to make AI a priority if the bubble bursts. Automakers that are more risk averse will react by retreating further, widening the gap between the leaders and the laggards, Pacheco said.
Benefits from AI become clearer
Market corrections don’t negate automakers’ need for AI for their digital and physical tech stacks, said Stefan Puehl, partner and digital leader, PwC Germany. “AI bubbles may burst – AI doesn’t,” Puehl said.
Carmakers need to concentrate on getting an AI-focused software strategy right and “focus on building, not bubbles,” Puehl said.
Heiko Huettel, Capgemini’s software leader and chief technology and innovation officer for automotive, said the challenge for automakers is improving productivity and bringing vehicles to market faster.
AI can help to improve efficiency and speed up product development, Huettel said.
According to Rewiring automotive product development, a Capgemini Research Institute report released in August 2026, those automotive organizations successfully scaling AI are already seeing tangible benefits, reporting 17 percent faster development cycles, 19 percent higher engineering productivity and 19 percent shorter time to market.
Some 51 percent of automaker respondents rank AI as one of the top three technologies for achieving strategic goals over the next five years, making it the most frequently cited technology in PwC’s global automotive sector outlook, published in September 2026.
“If the AI bubble bursts, it doesn’t mean that automakers should ease their investment in AI,” Gartner’s Pacheco said. “It doesn’t mean that AI isn’t important. On the contrary, AI becomes even more important because this is the kind of situation that is going to test automakers’ resolve.”
