The Bank of England has sounded the alarm, warning of an intensifying risk of a “sudden correction” in global financial markets driven by the spending frenzy on artificial intelligence.
As Reuters points out, it’s the institution’s clearest warning yet that we could be on the precipice of an AI disaster.
“The risk of a sharp market correction has increased,” said the Bank of England’s financial policy committee during a Wednesday meeting, as quoted by Reuters, warning that “equity market valuations appear stretched, particularly for technology companies focused on artificial intelligence.”
“Should expectations around the impact of AI become less optimistic,” markets could be left “particularly exposed,” the bank cautioned.
Concerns over an AI bubble bursting have grown lately, with analysts recently finding that it’s 17 times the size of the dotcom-era bubble and four times bigger than the 2008 financial crisis.
Analysts — and even OpenAI CEO Sam Altman himself — have acknowledged that AI companies are struggling to make enough money to cover their exorbitant expenses, concerns that drove a major tech selloff earlier this year.
And whether they’ll ever be able to produce enough revenue is a looming question. A startling report by researchers at MIT spooked investors in August, finding that only a measly five percent of AI pilot programs help businesses succeed at “rapid revenue acceleration,” with the vast majority falling flat.
Yet according to recent estimates, generative AI now accounts for roughly 40 percent of the United States’ gross domestic product. In other words, if the AI spending boom falls apart, it could take down the entire economy with it.
Fund manager and former Morgan Stanley investor Ruchir Sharma warned in a recent piece for the Financial Times that the US economy has turned into “one big bet on AI.”
“AI companies have accounted for 80 per cent of the gains in US stocks so far in 2025,” he wrote. “That is helping to fund and drive US growth, as the AI-driven stock market draws in money from all over the world, and feeds a boom in consumer spending by the rich.”
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