"The Bank of England has warned of a "sharp correction" in the value of major tech companies with growing fears of an artificial intelligence (AI) bubble. It said share prices in the UK are close to the "most stretched" they have been since the 2008 global financial crisis, while equity valuations in the US are reminiscent of those before the dotcom bubble burst. The central bank's financial stability report warned valuations are "particularly stretched" for companies focused on AI."
"The Bank said the growth of the AI sector in the next five years would be fuelled by trillions of dollars of debt, raising financial stability risks if the value of the companies falls. It cited industry figures forecasting spending on AI infrastructure could top $5tn (3.8tn) and said much of this would be funded by AI firms themselves, but around half would come from outside sources, mostly through debt."
The Bank of England warned of a sharp correction risk for major tech companies amid growing concerns about an AI bubble. UK share prices are approaching levels described as the most stretched since the 2008 global financial crisis, while US valuations recall pre-dotcom-bubble levels. Valuations are particularly stretched for AI-focused firms. The Bank plans to reduce required capital for High Street banks to encourage lending after stress tests showed resilience in a severe scenario. The Bank warned that trillions of dollars of mostly debt-funded AI infrastructure spending could amplify losses and financial stability risks if asset prices fall.
Read at www.bbc.com
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