Excessive AI spending risks global financial consequences, BIS warns
The BIS warned that AI market exuberance could create major financial instability because AI growth is being financed heavily with debt and leveraged nonbank structures. Five major hyperscalers are expected to spend over $1 trillion on AI capex in 2025–2026, while valuations and earnings growth look increasingly mismatched. A reversal in AI optimism, especially if inflation stays high and central banks tighten, could trigger sharp asset-price declines, cascading defaults, and disruptive macro-financial feedback loops. The BIS said the risk is amplified by strong U.S. market concentration and rising AI firms’ leverage. It also flagged stablecoins as a threat to monetary control and noted that AI-driven chip demand may fuel “chipflation,” adding to inflation.
