Bank of England gives a warning to AI’s ‘high risk’ bubbles

Wednesday 08 October 2025 12:37 WIB

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Bank of England has warned the potential of “sharp correction” in the global market because of the valuation of shares that “stretch” due to booming artificial intelligence (AI).

The Financial Policy Committee of the Central Bank has warned the fall of the value of US giant technology companies can trigger problems abroad.

“Such global risk crystallization can have a material impact on Britain as a country with an open economy and a global financial center,” the committee said in its latest report that analyzed the state of the financial ecosystem.

The group said the current situation was “comparable to the peak” dot-com bubbles, which began in 1995 and exploded five years later, thus triggering great losses for investors.

“Sharp correction can interact with vulnerability in the market -based financial system, so that it has a negative impact on the cost and availability of financing for households and business,” he added.

Rachel Reeves bet on AI for growth

Such corrections will be a big problem for the Chancellor Rachel Reeves, who last month bet on the US technology giant to help grow the British economy.

The technology giant from all Atlantic promises more than £ 30 billion in AI and Cloud investments throughout Britain during the visit of President Donald Trump.

Microsoft allocated £ 22 billion to build the largest supercomputers and AI infrastructure in the country. Meanwhile the maker of the Nvidia and OpenAI chip drawn up plans to create the largest AI computing facilities in Europe.

After the announcement, said Head of Nvidia Jensen Huang AM City: “We will increase productivity, we will expand the market, we will create a new product line”.

But the risk of sharp correction – according to the Bank of England is still “high” – can frustrate the ambition.

Unprecedented market concentrations-with the market share of the top five S&P 500 members reached the highest number in 50 years by 30 percent-touted as the main cause of concern.

The committee said the concentration of solid and soaring shares made “the equity market very exposed if expectations of the impact of AI became less optimistic”.

However, some economists say that if this soaring AI trend actually happens, this can narrow the assessment gap between the British and US stock market.

Joe Maher, the market economist in Capital Economics, said: “If AI’s bubbles break, we suspect the gap in the assessment will shrink significantly but will not disappear.”

However, the agreement in this sector continues with this week Openai signed a billion -dollar agreement with the AMD chip giant to build a large -scale AI data center in an effort to challenge Nvidia’s dominance.