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Bank of England warns of ⁣Potential AI Bubble Burst

The central bank of the United Kingdom is worried about an AI bubble burst.

“On a number ⁢of measures, equity market valuations appear stretched, particularly for⁤ technology ⁣companies focused on⁣ Artificial Intelligence (AI),” the bank’s financial policy committee said, according to a record of its latest meeting. “This, when combined⁢ with increasing concentration within market indices,‍ leaves equity markets ⁢particularly exposed should ‍expectations around the impact of AI become less⁢ optimistic.”

The ⁣Bank also warned that stock market⁣ price valuations were comparable to the peak‍ of the dot-com bubble, and the market share of the ⁤top ⁤five members of the S&P 500 was at its highest concentration in 50 years. Those five companies are, unsurprisingly, AI-focused tech giants Nvidia, Microsoft, Apple, Amazon, and Meta.

all five of ⁤these companies are ‍spending eye-watering figures on AI ⁣and the ⁣stock market loves it. Microsoft became the second company ⁤to ever hit a $4 trillion market valuation earlier this year after posting its ⁤largest ever quarterly expenditure forecast.Nvidia, conversely, is the first and only company in the world to hit a $4.5‍ trillion⁤ market cap.

“Material⁤ bottlenecks to AI progress ⁤- from power, data, or commodity supply chains – as‍ well as conceptual breakthroughs‍ which change the anticipated AI infrastructure requirements for the development and utilisation of powerful AI ⁤models could also harm valuations, including for companies whose revenue expectations are derived from high levels of anticipated AI infrastructure ⁢investment,” the bank said.

fed researchers issued a similar⁤ warning