The BIS warns an AI bust could hit credit markets as hard as the 2008 financial crisis

TL;DR

The BIS warned that an AI investment bust could be as disruptive to credit as 2008, flagging circular financing and poorly disclosed risk in its annual report.

The Bank for International Settlements warned on Sunday that an AI investment bust could hit credit markets with disruption comparable to the 2008 financial crisis. In its annual report, the Basel-based institution listed AI-led risks alongside inflation and fiscal stress as “pressure points” that “demand attention.”

“Disappointment in returns could trigger a sudden pullback in financing and turn the capex boom into a protracted investment bust, with potential knock-on effects on financial conditions,” the BIS said. It added that “a major equity-market correction could have larger macroeconomic consequences today than in the past.”

The report singled out what it called “circular financing” as a specific vulnerability. Chipmakers and hyperscalers take equity stakes...

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