The Bank of England warned in its quarterly Financial Stability Report that AI
valuations remain at risk of a sharper correction than in July, and that such a
collapse could have broad effects on global growth and sovereign bond yields.
Policymakers said interconnected vulnerabilities in the financial system are
rising and the likelihood of simultaneous shocks has increased. The Bank flagged
the multi-trillion-dollar AI market as a major risk and cited a renewed
escalation in the Middle East, which could trigger a longer-lasting negative
supply shock and raise sovereign debt risk. The Bank reiterated prior warnings
that asset froth may be forming across AI-related equities, credit markets and
sovereign debt.
