Bank of England Warns AI Bubble Burst Could Spark Global Economic Downturn

The governor of the Bank of England has issued a warning about the potential for artificial intelligence to cause a global economic downturn. In a letter to G20 finance ministers, Andrew Bailey cautioned that a 'future market correction' could spread across the world if the AI bubble bursts.

According to Bailey, markets remain vulnerable to a potentially disorderly correction due to fragilities in sovereign debt markets and high valuations. He also mentioned the increasing cross-investment between AI companies and hyper scalers, which he believes could amplify a future market correction.

The warning comes as the UK government announced a £100 million fund aimed at backing British AI start-ups. The fund is part of the country's efforts to grow its 'Sovereign AI' capacity, homegrown AI technology that ensures the UK is not dependent on services and infrastructure developed abroad.