Bank of England Chief Warns AI Bubble Risks Market Shocks — SkimNews
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- Andrew Bailey, governor of the Bank of England, warned that AI could trigger market shocks and cautioned that 'not everybody always wins,' citing historical precedents like Netscape's fall after the early internet era
- Nvidia is currently the world's most valuable listed company at a $5.5tn (£4.14tn) market valuation, reflecting investor expectations of massive AI-driven profits
- Alphabet, Meta, Microsoft, and Amazon are collectively spending hundreds of billions of dollars on AI technology, while Anthropic and OpenAI are preparing to sell shares on US stock markets in moves expected to channel hundreds of billions more into the sector
- Bailey flagged AI-enabled cyber attacks as a 'potentially very powerful weapon' in the wrong hands, and said deepfakes are now so sophisticated that even the Bank struggled to trace fake images of him and Nigel Farage promoted on X in June
- Bailey said AI could benefit the Bank by speeding up analytical work that supports the Monetary Policy Committee's interest rate decisions, describing it as 'a tool in the hands of the policy maker'
- UK 30-year bond yields rose above 6% on Thursday — their highest since 1998 — while US 10-year yields hit 5.34%, their highest since 2002, as investors increasingly redirected capital toward AI investments
Why it matters: Bailey's warning lands while the bond market is already sending distress signals: UK 30-year yields haven't been above 6% since 1998 and US 10-year yields are at a 23-year high, as investors rotate from government debt into AI stocks. If the AI bets from trillion-dollar companies like Nvidia fail, the resulting correction hits a financial system that has simultaneously been losing its traditional bond safety valve.
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