IMF warns $1.4tn in circular AI deals could deepen a market correction
A correction in AI-related stocks and debt could set off market turmoil, the International Monetary Fund said on Tuesday. It named the AI risk as one of three that could sharply tighten financial conditions. The other two are a sharp rise in government bond yields and cyber threats.
The warning came in the IMF’s Global Financial Stability Report at the annual meetings in Bangkok. Weaker or less durable AI investment and profits could trigger the correction, the Fund said. Rising borrowing, concentrated exposures and circular AI deals could make it worse.
The IMF reviewed 14 publicly disclosed deals since 2023. In them, investors led by hyperscalers put about $300bn of equity into financially weaker AI firms, alongside $650bn in debt. In return, they secured $1.4tn in future revenue commitments through services or chip orders.
About $320bn of that debt sits with the firms receiving the money, the report said. A...
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