Threat to global markets: Risks posed by AI bubble and Federal Reserve losing credibility
The Bank of England has warned there is a growing risk of a “sudden correction” in global markets as it raised concerns about soaring valuations of leading AI tech companies.
Policymakers said there were also threats of a “sharp repricing of US dollar assets” if the Federal Reserve lost credibility in the eyes of global investors. It comes as Donald Trump’s continues to attack the US central bank and threaten its independence.
Continued hype and optimism about the potential for AI technology has led to a rise in valuations in recent months, with companies such as OpenAI now worth $500bn (£372bn), compared with $157bn last October. Another firm, Anthropic, has almost trebled its valuation, going from $60bn in March to $170bn last month.
However, the Bank of England’s financial policy committee (FPC) warned on Wednesday: “The risk of a sharp market correction has increased.
“On a number of measures, equity market valuations appear stretched, particularly for technology companies focused on artificial intelligence. This … leaves equity markets particularly exposed should expectations around the impact of AI become less optimistic.” [Continue reading…]