Bailey Warns AI Investment Could Expose Markets to Shocks

Bank of England Governor Andrew Bailey warned that heavy investment in artificial intelligence and high expectations for its commercial returns could leave financial markets vulnerable to shocks if the technology fails to deliver. He said the central bank is monitoring AI-related investment and must ensure the financial system can withstand possible asset-price corrections. Bailey also emphasized that AI has potential to support economic growth, alongside risks that include cyberattacks and deepfakes. Bailey said rising valuations reflect expectations that AI will generate substantial economic and financial returns. But he cautioned that investors should not assume every company will succeed, drawing a comparison with earlier technology markets in which early leaders did not always endure. Asked about the possibility of an AI investment bubble bursting, he said asset prices could face a correction at some point. He did not say that a bubble or market shock had already occurred. The scale of investment has increased as companies build AI systems and the infrastructure needed to run them.