Bank of England warns about AI-driven tech bubble risk

LONDON

The Bank of England has warned that soaring valuations of technology firms could drop sharply amid potentially “disappointing” progress in artificial intelligence (AI).

Big US tech companies, including Nvidia, Google and Microsoft, have seen their share prices surge over the last year, driven by expectations that AI adoption will increase globally.

But the Bank of England Financial Policy Committee (FPC) highlighted the growing risk of a “sharp correction” in financial markets.

“On a number of measures, equity market valuations appear stretched, particularly for technology companies focused on artificial intelligence,” according to minutes of the FPC’s latest meeting. “This, when combined with increasing concentration within market indices, leaves equity markets particularly exposed should expectations around the impact of AI become less optimistic.”

The committee warned that “disappointing” progress on AI capability or adoption, or increased competition, could drive valuations lower across the sector.

It added that “material bottlenecks to AI progress,” including across power, data, or commodity supply chains, could harm valuations, particularly for firms expected to benefit from greater AI investment.

LONDON

The Bank of England has warned that soaring valuations of technology firms could drop sharply amid potentially “disappointing” progress in artificial intelligence (AI).

Big US tech companies, including Nvidia, Google and Microsoft, have seen their share prices surge over the last year, driven by expectations that AI adoption will increase globally.

But the Bank of England Financial Policy Committee (FPC) highlighted the growing risk of a “sharp correction” in financial markets.

The committee warned that “disappointing” progress on AI capability or adoption, or increased competition, could drive valuations lower across the sector.