AI Bubble Bursts Could Spark Global Economic Downturn, Warns Bank of England Governor

The governor of the Bank of England has warned that artificial intelligence could cause a global economic downturn if it bursts, leading to a future market correction. Andrew Bailey wrote in his capacity as chairman of the Financial Stability Board, an international watchdog, stating that markets remain vulnerable to a potentially disorderly correction that could spread across borders.

He cited sovereign debt markets as one area of concern, mentioning that leverage is interacting with high valuations and market concentration, particularly among AI companies and hyper scalers. This combination could amplify a future market correction if it occurs.

Meanwhile, the UK government has announced a £100 million fund aimed at backing British AI start-ups to grow the country's sovereign AI capacity and ensure the UK is not dependent on foreign services and infrastructure.