Bank of England Flags Sharp Correction Risk as AI Debt Surge Strains Financial System

The Bank of England warned Wednesday that artificial intelligence investments fueled by unprecedented debt accumulation pose mounting risks to financial stability, with AI-related valuations vulnerable to a sharper market correction than the selloff witnessed in July. In its latest financial stability assessment, the FPC highlighted that a loss of confidence in AI earnings prospects could trigger cascading losses across capital markets and potentially destabilize sovereign debt markets, particularly given growing reliance on AI productivity gains in economic forecasts.