IMF flags AI, bond and cyber risks to markets

The International Monetary Fund warned that a correction in AI-related assets, rising sovereign bond yields or a major cyberattack could tighten financial conditions and unsettle global markets, even as markets remain resilient. The risks are plausible near-term catalysts, the IMF said in its latest Global Financial Stability Report, and could become systemic if amplified by existing vulnerabilities. The report said expectations for AI investment and profits may prove too high. If AI capabilities can be developed with less investment than anticipated, or the economic gains fall short, asset prices tied to the sector could correct and spill over into broader markets. Growing borrowing, concentrated exposures and financing arrangements connecting stronger and weaker AI firms could intensify such a downturn, the IMF warned. An AI correction is one of three risks highlighted in the report. The fund also pointed to higher government borrowing costs and a major cyber incident. It said rising energy prices have pushed government bond yields higher and could renew inflationary pressure, leading policymakers to tighten monetary policy.