The Governor of the Bank of England has warned of a global stock market correction if indeed the AI bubble bursts. Bank of England Governor Andrew Bailey has warned that a sharp correction in AI-related asset valuations could have wider implications for global financial markets. In a letter to G20 finance ministers and central bank governors, Bailey, who also chairs the Financial Stability Board (FSB), highlighted concerns over rising leverage and the growing use of debt to finance AI investment.
Bailey warned that high investor optimism around AI, combined with increased leverage, could amplify the impact of a future market correction. The Bank of England has separately noted that AI-related firms are increasingly turning to external financing, including debt, to fund infrastructure investment. The central bank has also cautioned that a reassessment of AI companies’ growth and profitability prospects could trigger sharp adjustments in equity prices and potentially spill over to broader financial markets. Bailey stated the risk was compounded by investors borrowing huge sums to invest in a small number of AI companies and data centre providers, pushing up their valuations to astronomical levels. Nvidia, which is worth more than $5.2 trillion, recently raised $500 billion from a consortium of US banks and investors to fund its AI investment.
Bailey warned that “stretched asset valuations” in AI was one factor that could prompt a sharp economic slump. He stated, “markets remain vulnerable to a potentially disorderly correction that could spread across borders. The issue is not simply that investors are borrowing more, but that leverage is interacting with high valuations and market concentration.” Bailey’s warning was issued as the UK Government unveiled a £100 million fund to back British AI start-ups.
In fact Bailey’s letter, sent as chairman of the Financial Stability Board (FSB), which works with central banks and governments around the world also warned that AI risked unleashing a wave of cyber attacks that could cripple the global economy. He highlighted the threat posed by frontier AI, which covers the world’s most cutting-edge models developed by tech giants such as OpenAI and Anthropic. He warned that a cyber attack at a major institution could cause chaos with the world’s financial markets. “The global financial system is highly interconnected, and cyber disruption can spread across jurisdictions through common technology providers, shared infrastructure and cross-border financial activity,” he said.His warning comes after a number of tech giants have reported incidents of AI agents going rogue, deceiving internal systems to launch cyber attacks.
AI Bubble Burst Could Trigger Global Market Correction, Bank of England Governor Warns
