Bank of England Warns AI Bubble Could Spark Global Economic Downturn

The governor of the Bank of England has warned that artificial intelligence could trigger a global economic downturn if the AI bubble bursts.

Andrew Bailey, who chairs the Financial Stability Board, wrote to G20 finance ministers in a letter to express his concerns about the potential impact of an AI market correction.

Bailey noted that markets remain vulnerable to a potentially disorderly correction that could spread across borders, particularly given fragilities in sovereign debt markets. He highlighted the risk of leverage interacting with high valuations and market concentration, including cross-investment between AI companies and hyper scalers.

The Bank of England governor's warning comes as the UK government announced a £100 million fund aimed at backing British AI start-ups to grow the country's sovereign AI capacity. The goal is to ensure that the UK is not dependent on services and infrastructure developed abroad.