BIS warns of AI bubble risks and potential market correction

“The global economy remains a whirlwind of progress and danger,” the Basel-based bank writes.

“Resilience is being increasingly tested and pressured,” the bank adds.

Risks arising from the high valuations of AI companies after several years of huge investments in the sector are highlighted. If returns are not achieved, this could choke off funding and affect financial conditions.

In particular, the BIS warns against arrangements in the sector where issues of shares and bonds are tied to contracts for deliveries.

“A major stock market correction could have greater macroeconomic consequences today than in the past,” the BIS writes.