Bank of England Warns AI Boom Could Trigger Market Shocks

The Bank of England is sounding the alarm on the rapidly growing AI investment boom, warning that it poses significant risks to global financial markets.

The central bank's Financial Policy Committee report highlighted concerns over the increasing amounts of debt being used to finance AI-related investments. According to the report, global AI-related debt issuance has surged during 2026 and is expected to remain on a strong upward trajectory.

The Bank also noted that high valuations in AI investments are heavily dependent on expectations for future earnings and productivity gains. This means that if investors begin questioning whether current spending levels can generate the returns now priced into markets, the consequences could be severe.

A recent AI selloff in July already demonstrated this mechanism in action, with some leveraged investors forced to unwind positions as volatility increased. The stress did not spread into core financial markets at that time, but the Bank of England warned that similar market shocks could occur if AI-related investments continue on their current trajectory.

The warning is not just theoretical, it's based on real-world data and analysis. As more AI infrastructure is financed through bonds, private credit, and other borrowing, a growing number of investors become exposed to the same underlying assumptions about data-center demand, GPU utilization, and AI revenue.

Some market participants are already taking note of this risk, with Michael Burry increasing his bearish exposure through options. He is betting that an AI stock reversal could arrive sooner than expected.