Bank of England Warns AI Bubble Could Spark Global Economic Downturn

The governor of the Bank of England has warned that artificial intelligence could cause a global economic downturn if the AI bubble bursts. In a letter to G20 finance ministers, Andrew Bailey stated that 'markets remain vulnerable to a potentially disorderly correction that could spread across borders'.

Bailey noted that investors are borrowing more and that leverage is interacting with high valuations and market concentration in a way that could amplify a future market correction. He specifically highlighted the increasing cross-investment between AI companies and hyper-scalers as a concern.

The warning comes as the UK government announced a £100 million fund aimed at backing British AI start-ups, part of efforts to grow the country's 'Sovereign AI' capacity.