Bank of England Sounds Alarm on AI-Driven Market Shocks
The Bank of England (BoE) has warned that the rapid growth of artificial intelligence (AI) investments could lead to severe market shocks if corporate earnings expectations or productivity gains fall short.
According to BoE Governor Andrew Bailey, the massive capital inflows into AI have pushed asset prices sharply higher, increasingly intertwining technology spending with core financial markets.
Bailey noted that not everyone will benefit from these investments and cautioned that 'not everybody always wins'. He emphasized that the central bank is watching the huge amounts of money being invested in AI 'very carefully', highlighting the risk of a correction in asset prices.
The BoE's Financial Policy Committee highlighted that a significant portion of AI-related expansion is being fueled by rapidly growing debt and high leverage, raising the danger that a sudden shift in investor sentiment could amplify losses across global equities and credit.