Is the AI Gold Rush Over? Bank of England Signals Growing Bubble Risk

The Bank of England has signalled that the artificial intelligence gold rush may be built on unstable ground, warning of a growing bubble risk that threatens global markets. The bank’s Financial Policy Committee (FPC) stated that “stretched” valuations in the tech sector have increased the likelihood of a “sharp market correction.”
The current AI boom has produced staggering corporate valuations, with OpenAI reaching $500 billion and Anthropic hitting $170 billion. However, the FPC suggests this frenetic investment activity is based on a level of optimism that may not be sustainable. The committee cautioned that equity markets are “particularly exposed” to a downturn if the hype surrounding AI begins to cool.
Recent data provides a strong basis for this caution. A comprehensive study from the Massachusetts Institute of Technology revealed that 95% of organizations are currently realizing zero financial return from their generative AI initiatives. This profound gap between investment and profit is a classic indicator of a speculative bubble that could be poised to burst.
Layered on top of this tech-specific risk is a significant political threat. The FPC expressed concern about Donald Trump’s sustained pressure on the US Federal Reserve, which could undermine its independence. The Fed’s credibility is a cornerstone of the international financial system, and any damage to it could have far-reaching effects.
The Bank warned that a loss of faith in the Fed could trigger a “sharp repricing of US dollar assets,” causing a wave of volatility across the globe. For the UK, the consequences of such a “spillover” would be “material,” potentially leading to a credit squeeze that impacts the entire British economy.