Bank of England Warns AI Valuations Could Trigger a Sharp Market Correction

The Bank of England has warned that the rapid rise in artificial intelligence focused technology stocks has created clear financial stability risks and could lead to a sharp correction in global markets.

AI Valuations Reach Their Most Stretched Levels In Years

The Bank’s latest Financial Stability Report says equity valuations linked to AI are now “particularly stretched”, with US technology firms approaching levels last seen before the dotcom bubble and UK valuations close to their most elevated point since the 2008 financial crisis. The Financial Policy Committee points out that a relatively small number of AI oriented firms have driven much of this year’s market gains, which means any reversal could have outsize effects.