Bank of England boss Andrew Bailey warns the AI boom could trigger market shocks

[ChrisJericho]

Bank of England Governor Andrew Bailey has warned that the AI boom could lead to market shocks, in an interview with the BBC. His main concern is that valuations of AI companies may not be sustainable. He said everybody is currently priced to be a winner, but not everybody always wins. This is outside our usual topics, but it ties directly into the AI spending threads we have had all week

Bailey said you could see some correction of asset prices at some point, and stressed that the financial system needs to be resilient enough to cope if that happens. He pointed to the example of Netscape and Google, a reminder that early leaders in a new technology are not always the ones who end up on top. Netscape dominated the early web browser market and then faded away. It is a lesson investors have to relearn every generation

According to reports, the FTSE 100 fell 124 points to 10,481 after his comments, although markets move for lots of reasons on any given day. Nvidia's value has passed $5.5 trillion, which gives a sense of how much optimism is baked into AI stocks. The Bank has also been warning about risks from rising AI related debt

His comments fit with what we have been reading all week. Bain says the industry needs $6 trillion a year in revenue by 2031 to justify its data centres, and Anthropic's prospectus shows huge losses alongside rapid growth. Even supporters of AI admit not every company will make it. The question is how much damage a correction would do to everyone else

I am keeping this to the AI side rather than investment advice, so please do the same. Do you think the AI boom is heading for a dot com style correction? And if it is, will the technology still come out the other side as important as people expect?

AI boom could trigger market shocks, Bank of England boss warnswww.bbc.co.uk