The International Monetary Fund has issued a stark warning about the potential for an AI-driven financial crisis, saying that a crash in AI company share prices could have global consequences. In its biannual Global Financial Stability Report, the IMF highlighted sky-high valuations and increasing debt levels in the AI sector as major vulnerabilities.
"The consequences of an AI correction could be global," the IMF warned, noting that Asian markets would be most exposed to a downturn, while the UK and euro area might be somewhat more insulated. The exposure of the rest of the world to US AI assets is at its highest level ever.
An AI crash was identified as one of three "salient risks" to global financial stability, alongside rising government borrowing costs and the threat of a major cyber-attack. The IMF called this trio "plausible near-term catalysts for a sharp tightening of financial conditions and market turmoil."
The report underlined the interconnected nature of big AI companies and the high levels of borrowing to fund investment in the sector. "Weaker or less durable investment and profitability in AI could trigger a correction in AI-related asset prices," it said, warning of cascading effects through leveraged exposures and circular financing arrangements.
The warning comes as AI companies continue to attract massive investment, with valuations reaching historic highs. The IMF's analysis suggests that the sector's rapid growth has created systemic risks that could transmit shocks across borders and asset classes.
