Autonomous AI Could Wreak Havoc on Stock Market, Bank of England Warns

The stock market is already an unpredictable place, and now the Bank of England has warned that the adoption of generative AI in financial markets could produce a monoculture and amplify stock movements even more. It cited a report by the bank’s financial policy committee that argued autonomous bots might learn volatility can be profitable for firms and intentionally take actions to swing the market. Essentially, the bank is concerned that the phrase “buy the dip” might be adopted by models in nefarious ways and that events like 2010’s infamous “flash crash” could become more common. With a small number of foundational models dominating the AI space, particularly those from OpenAI and Anthropic, firms could converge on similar investment strategies and create herd behavior. But more than just following similar strategies, models function on a reward system—when they are trained using a technique called reinforcement learning with human feedback, models learn how to produce answers th ... Read full article.