The Bank of England indicates that valuations of AI companies are “particularly tight” and their development in the coming years will be based on trillions of dollars of debt. According to forecasts, spending on AI infrastructure may exceed $5 trillion, half of which will come from external financing.
See also: The AI bubble is 17 times bigger than the dotcom bust? Here's what the experts say
“Deeper links between AI companies and credit markets could increase risks to financial stability in the event of a correction in asset prices,” warns the Bank of England in an analysis quoted by the BBC.
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The Bank of England has warned of a “sharp correction” in the value of major technology companies amid growing fears of an artificial intelligence (AI) bubble.
The Bank of England warns against an AI bubble. He recalls the 2008 crisis.
The bank said UK share prices are close to their “highest level” since the 2008 global financial crisis, while US share valuations resemble those before the dotcom bubble burst.
The artificial intelligence sector is growing at a breakneck pace, and its financing is largely based on debt. The Bank of England warns that a possible decline in the value of AI companies could threaten financial stability, as happened during the burst of the Internet bubble.
See also: The head of Google warns against the bursting of the bubble. “No company will be immune.”
Additionally – as pointed out by the Bank of England – reducing capital requirements for banks may affect the availability of loans, which is crucial for the economy.
The Governor of the Bank of England, Andrew Bailey, stressed that the AI sector in the US is “very concentrated”, which increases risks. “The difference with the dotcom situation is that these companies have positive cash flows, but that doesn't mean everyone will win,” Bailey said, quoted by the BBC.
He also added that AI could become a general-purpose technology that will spur productivity growth, but its impact on the economy remains uncertain.
