The Bank of England sees significant cracks in the foundation of the current artificial intelligence market boom, warning that they could lead to a collapse. The Financial Policy Committee (FPC) stated in a new report that the “risk of a sharp market correction has increased.”
One major crack is the disconnect between valuation and profitability. The foundation looks strong with “stretched” valuations like OpenAI’s $500 billion figure, but it is weakened by the reality that 95% of firms are seeing no return on their AI investments, according to an MIT study.
Another crack is the potential for supply chain disruptions. The FPC warned that “material bottlenecks” in power, data, or commodities could undermine the entire structure, causing the high valuations to crumble.
A third, external crack is being caused by political pressure. The FPC is concerned that Donald Trump’s attacks on the US Federal Reserve could shake the entire global financial edifice, triggering a “sharp repricing of US dollar assets.”
The FPC’s report serves as an engineer’s assessment: the structure is impressive, but the foundational weaknesses are becoming too significant to ignore. For the UK, which is financially connected to this structure, the risk of being caught in a collapse is “material.”