The Bank for International Settlements (BIS) has issued a warning about the financial stability risks stemming from the surge in investments in artificial intelligence (AI). The organization believes that a correction in the AI market could have repercussions for the global economy.

Pablo Hernández de Cos, the General Manager of BIS, stated on September 10 at the Global Fintech Fest in India that AI is already significantly impacting global macroeconomic conditions. He noted that the technological boom is simultaneously altering demand, supply, and financial markets, complicating the tasks of central banks.

AI Investments May Reach $4 Trillion

BIS estimates that the five largest technology companies in the world will allocate over $1 trillion towards AI investments in 2025-2026. Industry participants anticipate further acceleration, predicting that global investment in AI could increase from the current $500 billion to approximately $3-4 trillion by 2030.

Hernández de Cos pointed out that a growing portion of AI investments is being financed not through corporate profits, but via debt financing, including private loans.

This trend raises the potential vulnerability of the financial system should AI investment returns fall short of expectations.

BIS Identifies Bubble Risks

According to the BIS head, valuations of AI-related companies are already at elevated levels and are concentrated among a relatively small number of players. Major companies are simultaneously increasing capital expenditures while increasingly relying on borrowed funds.

Another concern is the phenomenon of circular financing. Chip manufacturers and cloud infrastructure operators may acquire stakes in AI companies, which in turn commit to purchasing their computing power and equipment. This creates complex interconnections that are difficult to evaluate and monitor.

Hernández de Cos warned that if returns on AI investments do not meet expectations, a reduction in investments could transform the current investment boom into a downturn. He also highlighted the investment race among AI companies as a risk factor that may lead to excessive spending.

BIS has drawn parallels between the current situation and past technological investment booms, such as the railway mania in 19th-century Britain, the electrification of the 1920s, and the dot-com bubble at the end of the 1990s. In all these cases, the technologies were real, but the capital attracted ultimately exceeded what future earnings could justify.

AI Accelerates Growth

Despite these concerns, BIS does not view the development of AI solely as a threat. The organization acknowledges the substantial potential of the technology to enhance productivity.

Research cited by Hernández de Cos indicates that the use of generative AI can boost productivity for specific tasks by 10% to 65%, with time savings ranging from about 20% to 50%. The median estimate for the long-term effect on aggregate factor productivity suggests an increase of approximately 0.5 percentage points per year.

At the same time, AI may reduce demand for workers engaged in routine cognitive tasks. According to the BIS head, early signs of employee displacement are already evident in customer support, programming, and administrative roles. Nearly 80% of companies, based on his data, are discussing the automation of production processes and the replacement of some labor.

Central Banks Face Increased Difficulty in Economic Forecasting

Another effect of AI is its direct impact on monetary policy. The technology influences productivity, demand, supply, and financial markets, making it more challenging for central banks to assess potential economic output, output gaps, and the natural interest rate.

BIS considers several future scenarios. In one, AI leads to sustainable productivity growth; in another, it results in self-reinforcing growth; and in a third, a "demand trap" emerges: automation redistributes income from labor to investments in AI, reducing consumer demand and ultimately slowing economic growth.

Lastly, BIS issued a warning about cyber risks. AI can assist both attackers and defenders, but the advantage may lie with the perpetrators: they only need to find a single vulnerability, whereas defenders must secure the entire system.

However, BIS does not assert that the current investment boom will inevitably culminate in a crisis. According to Hernández de Cos, the scale and speed of AI investments necessitate caution, and the ultimate impact of the technology will depend not only on its capabilities but also on policies, competition, benefit distribution, and the quality of institutions.

In August, Ray Dalio, founder of Bridgewater Associates, stated that the enthusiasm surrounding AI has inflated a bubble comparable to those seen in 1929 and 2000, identifying specific mechanisms that could lead to its collapse.