Bank of England governor says AI could cause global economic downturn

The Bank of England's governor, Andrew Bailey, has cautioned that artificial intelligence could trigger a global economic downturn if the AI bubble bursts, according to a letter addressed to G20 finance ministers meeting in North Carolina, USA. Bailey, who chairs the Financial Stability Board, highlighted the market's vulnerability to a disorderly correction due to leverage interacting with high valuations and market concentration, particularly the increasing cross-investment between AI companies and hyperscalers.

He expressed concerns that a significant shock or combination of shocks could simultaneously exacerbate multiple vulnerabilities. This warning arrives as Chancellor John Healey announced a £100 million fund to support British AI startups, part of the UK government's strategy to bolster its "Sovereign AI" capacity. The initiative aims to ensure the country does not rely on foreign-developed AI services and infrastructure, with a focus on addressing challenges such as NHS waiting lists, patient care improvement, cybersecurity, and defense.