Excessive AI spending risks global financial consequences, BIS warns

The AI investment surge is a potential flashpoint for systemic risk, “as financing has relied on enormous debt and highly leveraged nonbank structures that can rapidly unwind,” one analyst said in response to the report.

The Bank for International Settlements has warned that artificial intelligence “exuberance” could have major financial consequences, as heavy reliance on debt financing in AI ventures raises the risk of cascading defaults if investor optimism fades.

The five largest hyperscalers are set to spend more than $1 trillion on AI-related capital expenditures from 2025 through 2026, and these commitments are outpacing earnings, the Basel-based institution said in its annual economic report released Sunday.

“Equity valuations are elevated, particularly for firms at the core of AI development ... sustaining such high growth could become increasingly challenging,” the bank said. 

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