{"id":287745,"date":"2025-10-08T23:30:11","date_gmt":"2025-10-08T23:30:11","guid":{"rendered":"https:\/\/www.europesays.com\/us\/287745\/"},"modified":"2025-10-08T23:30:11","modified_gmt":"2025-10-08T23:30:11","slug":"financial-institutions-sound-warning-about-an-ai-bubble","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/us\/287745\/","title":{"rendered":"Financial institutions sound warning about an AI bubble"},"content":{"rendered":"

LONDON (AP) \u2014 Lingering doubts about the economic promise of artificial intelligence technology<\/a> are starting to get the attention of financial institutions that raised warning flags this week about an AI investment bubble. <\/p>\n

Officials at the Bank of England on Wednesday flagged the growing risk that tech stock prices pumped up by the AI boom could burst. <\/p>\n

\u201cThe risk of a sharp market correction has increased,\u201d the U.K. central bank said. <\/p>\n

The head of the International Monetary Fund raised a similar alarm hours after the Bank of England\u2019s report.<\/p>\n

Global stock prices have been surging, fired up by \u201coptimism about the productivity-enhancing potential of AI,\u201d IMF Managing Director Kristalina Georgieva said.<\/p>\n

But financial conditions could \u201cturn abruptly,\u201d she warned in a speech<\/a> ahead of the organization\u2019s annual meeting next week in Washington.<\/p>\n

Is there an AI bubble?<\/p>\n

\u201cBubbles obviously are never very easy to identify, but we can see there are a few potential symptoms of a bubble in the current situation,\u201d said Adam Slater, lead economist at Oxford Economics.<\/p>\n

Those symptoms include rapid growth in tech stock prices, the fact that tech stocks now comprise about 40% of the S&P 500, market valuations that appear \u201cstretched\u201d beyond their worth and \u201ca general sense of extreme optimism in terms of the underlying technology, despite the enormous uncertainties around what this technology might ultimately yield,\u201d Slater said.<\/p>\n

The most optimistic projections about the fruits of generative AI products foresee a transformation of the economy, leading to annual productivity gains that Slater says have not been seen since the reconstruction of Europe after World War II. At the lower end, economist Daron Acemoglu of the Massachusetts Institute of Technology has predicted a \u201cnontrivial but modest\u201d U.S. productivity gain of just 0.7% over a decade.<\/p>\n

\u201cYou\u2019ve got this incredibly wide range of possibilities,\u201d Slater said. \u201cNobody really knows where it\u2019s going to land.\u201d<\/p>\n

Doubts about the worth of top AI companies<\/p>\n

Investors have closely watched a series of intertwined deals over recent months between top AI developers such as OpenAI, maker of ChatGPT, and the companies building the costly computer chips and data centers needed to power these AI products.<\/p>\n

OpenAI doesn\u2019t turn a profit but the privately held San Francisco firm is now the world\u2019s most valuable startup<\/a>, with a market valuation of $500 billion. It recently signed major deals with chipmaker Nvidia<\/a>, the world\u2019s most valuable publicly traded company, and its rival AMD<\/a>, and a $300 billion deal with tech giant Oracle for the buildout of future data centers. <\/p>\n

The Bank of England didn\u2019t name any specific companies but said that on \u201ca number of measures, equity market valuations appear stretched, particularly for technology companies focused on Artificial Intelligence.\u201d<\/p>\n

The report said stock market valuations are \u201ccomparable to the peak\u201d of the 2000 dotcom bubble<\/a>, which then deflated and led to a recession. With tech stocks accounting for an increasingly large share of benchmark stock indexes, stock markets are \u201cparticularly exposed should expectations around the impact of AI become less optimistic.\u201d<\/p>\n

The bank outlined so-called downside risks, including shortages of electricity, data or chips that could slow AI progress, or technological changes that could lessen the need for the type of AI infrastructure currently being built<\/a> around the world.<\/p>\n

The IMF\u2019s Georgieva said current stock valuations \u201care heading toward levels we saw during the bullishness about the internet 25 years ago. If a sharp correction were to occur, tighter financial conditions could drag down world growth,\u201d she said.<\/p>\n

What the tech bosses say<\/p>\n

Tech company bosses are downplaying the doomsayers. <\/p>\n

The current AI boom is an industrial, rather than financial or banking, bubble and will be beneficial for society even if it bursts, Amazon founder Jeff Bezos said. <\/p>\n

\u201cThe ones that are industrial are not nearly as bad. It could even be good because when the dust settles and you see who are the winners, society benefits from those inventions,\u201d Bezos said at a recent tech conference in Italy. <\/p>\n

He compared it to a previous biotech bubble in the 1990s that resulted in new life-saving drugs.<\/p>\n

The excitement around AI is drawing in a huge wave of money to fund new business ideas, but it\u2019s also clouding investors\u2019 judgment, Bezos said.<\/p>\n

\u201cEvery company gets funded, the good ideas and the bad ideas. And investors have a hard time in the middle of this excitement distinguishing between the good and bad ideas and so that\u2019s also probably happening today,\u201d he said.<\/p>\n

On a tour last month of a Texas data center<\/a>, OpenAI CEO Sam Altman predicted people will \u201cmake some dumb capital allocations\u201d and there will be short-term ups and downs of overinvestment and underinvestment. <\/p>\n

But he added that \u201cover the arc that we have to plan over, we are confident that this technology will drive a new wave of unprecedented economic growth,\u201d along with scientific breakthroughs, improvements to quality of life and \u201cnew ways to express creativity.\u201d<\/p>\n

Awaiting the promise of more useful AI agents<\/p>\n

Nvidia CEO Jensen Huang acknowledged in a CNBC interview on Wednesday that OpenAI doesn\u2019t yet have the money to buy its chips, but \u201cthey\u2019re going to have to raise that money\u201d through revenue, which \u201cis growing exponentially,\u201d along with equity or debt.<\/p>\n

Huang said he also believes a transition has happened as leading AI developers are moving from chatbots that operated \u201cbasically at a loss\u201d because the models \u201cweren\u2019t useful enough to pay for\u201d to one in which the AI systems are capable of higher-level reasoning.<\/p>\n

\u201cIt\u2019s doing research before it answers a question,\u201d he said. \u201cIt goes on the web and studies other PDFs and websites, it can now use tools, generate information for you, and it creates responses that are really useful.\u201d<\/p>\n

AI companies have spent more than a year pitching the transformative potential of \u201cAI agents\u201d<\/a> that can go beyond a chatbot\u2019s capability by being able to access a person\u2019s computer and do coding<\/a> and other work tasks on their behalf. But as the initial hype fades, Forrester analyst Sudha Maheshwari said businesses looking to buy these AI tools are taking a closer look at whether they\u2019re getting enough return on their investments.<\/p>\n

\u201cEvery bubble inevitably bursts, and in 2026, AI will lose its sheen, trading its tiara for a hard hat,\u201d she wrote in a report Wednesday. <\/p>\n

\u2014\u2014<\/p>\n

O\u2019Brien reported from Providence, Rhode Island and Abilene, Texas.<\/p>\n","protected":false},"excerpt":{"rendered":"LONDON (AP) \u2014 Lingering doubts about the economic promise of artificial intelligence technology are starting to get the…\n","protected":false},"author":3,"featured_media":287746,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[12],"tags":[147962,229,6229,738,64,79,440,57,59,65,22489,4061,2010,147,55405,25608,923,16266,158,61,376,67,132,68],"class_list":{"0":"post-287745","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy","8":"tag-adam-slater","9":"tag-advanced-micro-devices","10":"tag-amazon-com","11":"tag-artificial-intelligence","12":"tag-business","13":"tag-economy","14":"tag-europe","15":"tag-general-news","16":"tag-inc","17":"tag-information-technology","18":"tag-international-monetary-fund","19":"tag-jeff-bezos","20":"tag-jensen-huang","21":"tag-nvidia-corp","22":"tag-openai-inc","23":"tag-oracle-corp","24":"tag-sam-altman","25":"tag-stocks-and-bonds","26":"tag-technology","27":"tag-u-s-news","28":"tag-united-kingdom","29":"tag-united-states","30":"tag-unitedstates","31":"tag-us"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@us\/115341153065452801","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/287745","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/comments?post=287745"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/287745\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media\/287746"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media?parent=287745"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/categories?post=287745"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/tags?post=287745"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}