AI Bubble Bursts Risk Global Economic Downturn Warns Bank of England Governor
The Bank of England's governor has warned that artificial intelligence could trigger a global economic downturn. In a letter to G20 finance ministers, Andrew Bailey highlighted the risks associated with the AI bubble bursting and causing a 'future market correction' that spreads worldwide.
Mr. Bailey also mentioned the volatility stemming from energy supply shocks caused by the US-Iran war. He noted that markets are vulnerable to a potentially disorderly correction that could spread across borders, particularly given fragilities in sovereign debt markets.
The governor emphasized that it's not just about investors borrowing more, but rather that leverage is interacting with high valuations and market concentration, specifically the increasing cross-investment between AI companies and hyper scalers. This amplifies the risk of a future market correction.