Central bankers warn AI boom risks a financial crash

TL;DR:

• The Bank for International Settlements has warned that “excessive” spending on AI data centres and opaque financing could spark a crisis akin to the 2008 credit crunch.
• It flagged growing risk in the web of ties between AI giants, shadow banks and data-centre builders, with stress “already visible” in private credit.
• The warning joins similar alarms from the Bank of England and IMF over stretched AI valuations.

Debt-fuelled investment in artificial intelligence is raising the risk of a global financial crisis, the Bank for International Settlements has warned. The BIS, known as the central bankers’ bank, said “excessive” spending on new data centres and opaque transactions could unravel and threaten financial stability “in the event of an AI bust”.

Echoes of past bubbles

The BIS pointed to the tangled financial relationships binding AI firms, shadow banks and infrastructure developers. Should hyperscalers slow their aggressive capital spending, it said, “many borrowers across the supply chain could struggle to replace lost revenue and service their debt”, with the sector’s opaque financing compounding the danger. General manager Pablo Hernández de Cos warned that a reversal of “AI exuberance” could carry “large macroeconomic consequences”.

The report drew parallels with the dotcom crash, the British railway mania of the 1840s and the “roaring 20s” before the Great Depression. It noted signs of stress are already showing in private credit funds, some inundated with redemption requests and forced to block withdrawals. The warning follows the Bank of England’s December alert that share prices were the “most stretched” since 2008, and the IMF’s comparison of AI valuations to the dotcom bubble.

The fragility is not just financial. The BIS cited bottlenecks in data-centre construction and chip shortages as further threats — echoing reports that Google has capped Meta’s access to its Gemini models amid capacity strain. Markets have already wobbled: the Nasdaq fell as much as 1.3% on Friday and tech stocks have slid as investors question AI spending.

Looking forward

For UK readers, the BIS adds an authoritative voice to a chorus of caution that now includes Threadneedle Street itself. None of the warnings call the end of the AI boom — but they sharpen the question of how much of the spending will pay off, and who is left exposed if it does not. Businesses weighing AI investment would do well to separate durable productivity gains from the financial froth surrounding them.