IMF warns AI stock bubble could destabilize global finance
The IMF's Global Financial Stability Report warns that inflated valuations and rising debt among AI companies could trigger a market correction with worldwide effects. It also identifies higher government borrowing costs and the possibility of a major cyber-attack as near-term risks. The report notes that the largest US tech stocks now make up a much larger share of the S&P 500 than a decade ago.
The IMF's twice-yearly Global Financial Stability Report ranks an AI share-price slump among three near-term dangers, together with costlier government borrowing and a major cyber-attack. It says such forces could abruptly tighten financial conditions and unsettle markets.
The report notes that seven large US technology firms now represent over 35% of the S&P 500, compared with 12% ten years earlier. Their combined value has risen more than 50% in two years. It also cites $300bn of deals between hyperscalers and smaller or less robust AI companies, plus $650bn debt and $1.4tn future commitments.
A sharp AI-led market correction could hit investors, pension funds and households whose savings are tied to US equities, especially in Asia and other exposed regions. It may also cool tech investment and hiring, while tighter financial conditions could raise borrowing costs for governments and firms. A major cyber-attack could further disrupt services and confidence. The effects would likely vary, with some markets and investors more insulated than others.