AI could cause global economic downturn, Bank of England governor warns
The governor of the Bank of England, Andrew Bailey, has warned that artificial intelligence (AI) could potentially trigger a global economic downturn. In a letter to G20 finance ministers, Bailey mentioned the risk of a "future market correction" that could spread worldwide if the AI bubble bursts. He highlighted the volatility caused by energy shocks stemming from the US-Iran war and the vulnerabilities in sovereign debt markets.
Bailey emphasized that the issue lies not only in increased borrowing but also in the interaction of leverage with high valuations and market concentration, particularly between AI companies and hyper-scalers. This interaction could amplify a future market correction. His warning comes amid Chancellor John Healey's announcement of a £100 million fund to support British AI start-ups.
The fund aims to bolster the UK's "Sovereign AI" capacity, enabling companies to tackle challenges such as reducing NHS waiting lists and enhancing patient care, as well as strengthening cybersecurity and defense.
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