Bank of England Sounds Alarm on AI Debt Bubble Risk

The Bank of England is sounding an alarm about the rapidly growing amount of debt tied to artificial intelligence (AI) investments. The central bank warns that a collapse in AI earnings or adoption could trigger a sharp market correction, amplifying losses due to high valuations and increased leverage.

The Bank of England says global AI-related debt issuance has surged during 2026 and is expected to remain on an upward trajectory. As more AI infrastructure is financed through bonds, private credit, and other borrowing, investors become increasingly exposed to the same underlying assumptions about data-center demand, GPU utilization, and AI revenue.

The Bank also highlights the opacity of some financing structures and 'circular arrangements' that can make it harder for investors to assess true risk concentrations. This warning is not entirely theoretical, July's AI selloff showed a similar mechanism in action.