Bank of England Governor Andrew Bailey has warned that rapid advances in artificial intelligence could contribute to a global economic downturn if a sharp correction in AI-related markets spreads through the international financial system.
.webp "Bank of England Governor Warns AI Could Trigger Global Economic Downturn")
Writing to G20 finance ministers and central bank governors in his capacity as chair of the Financial Stability Board, Bailey said financial markets are increasingly vulnerable because of high AI-related valuations, rising investor borrowing and the concentration of investment in a relatively small group of technology companies.
Bailey warned that a sudden collapse in the value of AI companies could trigger a “disorderly correction” that spreads across borders, particularly because of growing financial links between AI firms and major technology infrastructure providers.
He also raised concerns about the cybersecurity risks associated with increasingly advanced AI systems. According to Bailey, frontier AI models are becoming more autonomous and capable, creating the possibility that cyberattacks could become faster, larger and more difficult for financial institutions to contain.
The warning comes as investors continue to pour enormous amounts of money into the AI sector, pushing valuations of major technology companies to record levels. Bailey cautioned that optimism surrounding AI, combined with leverage and market concentration, could amplify the impact of any major financial shock.
Bailey's warning does not mean AI will inevitably cause a global recession, but it highlights growing concerns among financial regulators that an AI market bubble, combined with cyber risks and excessive financial exposure, could create serious instability if confidence suddenly collapses