Bank of England Report: ‘Stretched’ Markets Leave No Room for AI Disappointment

Global markets have become so “stretched” that they leave no room for disappointment in the artificial intelligence sector, the Bank of England has warned. The Financial Policy Committee (FPC) stated in a new report that the “risk of a sharp market correction has increased,” with over-inflated AI stocks being a primary vulnerability.
The committee’s concern stems from the meteoric rise in valuations for AI-centric firms. With companies like OpenAI now worth $500 billion and Anthropic $170 billion, the FPC believes that expectations have reached a precarious peak. Any sign that AI’s progress is stalling or its adoption is slower than anticipated could trigger a severe market downturn.
This vulnerability is highlighted by recent data showing a lack of profitability in the sector. Research from MIT indicating that 95% of companies have seen zero return on generative AI investments suggests that the current stock prices are based on faith rather than fact. The Bank warned this could lead to a painful “re-evaluation of currently high expected future earnings.”
The global financial system is also facing a significant political threat from the United States. The FPC expressed unease about Donald Trump’s continued attacks on the independence of the Federal Reserve, which could undermine the credibility of the world’s most important central bank.
Should global investors begin to doubt the Fed’s impartiality, it could spark a “sharp repricing of US dollar assets” and a wave of volatility. The FPC concluded that the UK, as a major financial hub, is highly exposed to these “global spillovers,” which could disrupt the flow of finance to its businesses and households.