AI boom could trigger market shocks, Bank of England warns

Artificial intelligence could spark financial market shocks, and the UK must prepare for them, Bank of England Governor Andrew Bailey has warned in an exclusive interview with BBC Business.

Over recent years, substantial amounts of money have been spent on and loaned to AI firms in anticipation of massive returns, driving some of their market values into the multi-trillion dollar territory. Nvidia currently stands as the world's most valuable listed company at a valuation of $5.5tn or £4.14tn, while tech giants Alphabet, Meta, Microsoft, and Amazon are channeling hundreds of billions into the sector.

Stock photo for illustration only, not from the actual event

When asked if an AI bubble could burst, Bailey noted that some correction of asset prices is to be expected at some point. He pointed out historical parallels, stating that Google was not the initial market leader in internet search as Netscape preceded it, yet Netscape has faded into non-existence, proving that not everyone always wins.

"Google was not the first market leader in internet search. It was Netscape. Nobody can remember Netscape today. It doesn't exist. So not everybody always wins."

Andrew Bailey

Beyond financial risks, Bailey drew attention to other threats such as AI being weaponized to uncover cyber vulnerabilities much more effectively. He also addressed the rise of deepfakes, revealing personal experience when fabricated images depicting a physical fight between him and Nigel Farage circulated on X in June, which the Bank struggled to trace.