The global boom in artificial intelligence could lose momentum if rising debt, persistent inflation and excessive investment continue to build financial risks, the Bank for International Settlements (BIS) has warned in its latest annual report.
Often described as the “central bank for central banks”, the BIS said the rapid surge in AI-related spending has created strong optimism among investors. However, it cautioned that expectations may have moved ahead of economic reality, increasing the risk of financial instability if companies fail to generate the returns investors anticipate.
The report noted that major technology companies are investing hundreds of billions of dollars in artificial intelligence infrastructure, including data centres, chips and computing power. While these investments could transform productivity and drive long-term economic growth, the BIS warned that excessive spending financed through debt could leave companies and financial markets vulnerable if demand slows or profits disappoint.
The BIS compared the current AI investment wave with previous periods of market exuberance, including the dot-com boom, saying history shows that breakthrough technologies can attract more capital than markets can sustainably absorb. If investor confidence weakens, technology stocks could face sharp corrections with wider consequences for the global financial system.
Apart from AI, the institution also highlighted rising public debt, stubborn inflation and vulnerabilities in financial markets as key threats to the global economy. It urged governments and central banks to maintain sound fiscal policies, keep inflation under control and strengthen oversight of non-bank financial institutions to reduce systemic risks.
Despite its caution, the BIS stressed that artificial intelligence remains one of the most promising technological advances of recent decades. It said AI has the potential to improve productivity, boost innovation and support long-term economic growth if investments are made responsibly and supported by sustainable business models.
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