LONDON: The Bank of England has warned that the boom in artificial intelligence may be sowing the seeds of a financial bubble, one that, if burst, could threaten market stability.
In its December 2025 Financial Stability Report, the BoE said soaring valuations in AI-linked companies, particularly in the US and UK, now resemble levels last seen at the peak of the 2000 dot-com The central bank cautioned that deepening ties between AI firms and credit markets could magnify losses in the event of a correction.
The Bank of England noted that, despite UK banks remaining well-capitalised and household debt staying low, the financial system is not immune to shocks from global market instability, concentrated leverage, or a swift re-rating of AI assets.
The Bank’s warning adds a stark note to global concerns about the AI frenzy. While many investors remain bullish that AI will transform industries, the Bank cautioned that market exuberance, if not matched by economic substance, could leave financial markets exposed to a sudden and painful correction.