BIS Executive Warns Disappointing AI Returns Could Trigger Global Downturn

On September 10, Bank for International Settlements General Manager Pablo Hernández de Cos warned of the potential risks that the artificial intelligence investment boom could pose to global financial stability. Speaking at the Global Fintech Fest 2026 in Mumbai, India, de Cos highlighted how equity valuations have become elevated and concentrated among a few firms, leading to increasing reliance on debt as expenditure outpaces cash flows.

Chips manufacturers, hyperscalers and AI firms are interconnected in ways that are difficult to observe, creating a complex web of financial risk.

De Cos cautioned that should AI returns fail to meet expectations, a sharp pullback in investment could transform the current capital expenditure boom into a bust, echoing previous investment booms such as canals in the 1830s, British railways in the 1840s, electrification in the 1920s and the dotcom industry in the 1990s. Such a scenario could lead to a correction that adversely impacts the entire economy.

Since households now hold more wealth in equities, a correction could significantly reduce consumer spending, with potentially worldwide repercussions given that U.S. stocks constitute a substantial share of global equity markets.

A July BIS report revealed that AI investment could make the technology's boom unsustainable, citing its sheer scale, debt reliance and circular equity ties as areas of concern. Principal economist Phurichai Rungcharoenkitkul noted the AI build-out as among the largest technology-driven investment booms in U.S. history, raising questions about its financial stability.

In May, reports indicated that U.S. tech giants' record spending on AI had depleted their cash flow. With Amazon, Google, Microsoft and Meta collectively investing $725 billion in AI projects, their combined free cash flow is expected to decline by $4 billion in the third quarter.