A high alert has been issued by the Bank of England concerning a potential collapse in the artificial intelligence stock market. The Financial Policy Committee (FPC) warned that the “risk of a sharp market correction has increased” due to “stretched” valuations that are not supported by current economic returns, creating a fragile situation for global investors.
The committee pointed to the astronomical rise in the value of AI pioneers like OpenAI, now estimated at $500 billion, and Anthropic, which soared to $170 billion. This rapid growth, fueled by intense optimism, has left equity markets “particularly exposed should expectations around the impact of AI become less optimistic,” the FPC stated.
This warning is backed by sobering new research from the Massachusetts Institute of Technology, which found that 95% of companies are failing to achieve any return on investment from generative AI. This data suggests a chasm between market hype and tangible business outcomes, a classic sign of a speculative bubble that could burst and cause finance to dry up for the wider economy.
Further complicating the global financial outlook is political instability in the United States. The FPC expressed deep concern over Donald Trump’s sustained verbal attacks on the US Federal Reserve, which threaten its long-held independence and credibility. This political pressure introduces a significant and unpredictable element of risk.
A loss of global faith in the Fed could trigger a “sharp repricing of US dollar assets,” including US government debt, which would unleash volatility worldwide. The FPC emphasized that the UK, as a critical node in the global financial network, would face “material” spillover effects from such a crisis, jeopardizing its economic stability.