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

Bank of England Governor Andrew Bailey has issued a warning to G20 finance ministers about the potential for an economic downturn caused by artificial intelligence (AI). In a letter, he expressed concerns that a future market correction could spread globally if the AI bubble bursts.

According to Bailey, markets remain vulnerable to a potentially disorderly correction due to fragilities in sovereign debt markets. He noted that leverage is interacting with high valuations and market concentration, particularly between AI companies and hyper scalers, which could amplify a future market correction.

The warning comes as the UK government has announced a £100 million fund aimed at supporting British AI start-ups. The goal of this fund is to grow the country's sovereign AI capacity and reduce dependence on foreign services and infrastructure.

Chancellor John Healey emphasized that Britain aims to lead in harnessing AI technology to drive jobs, better public services, and growth across the UK.