IMF warns of potential AI bubble and mounting financial risks

The International Monetary Fund (IMF) has raised the alarm over a potential artificial intelligence bubble, warning that skyrocketing capital expenditure by tech giants could trigger severe global financial instability if profit expectations fall short.

Writing on her official blog, IMF Managing Director Kristalina Georgieva warned that stock valuations are racing ahead of real productivity gains. With tech firms pouring hundreds of billions into data centres and AI infrastructure - and their share of investment-grade bond issuance surging tenfold from under 1% to 10% in just two years - the fund fears a sharp stock market correction could ripple across the highly leveraged, circular AI ecosystem.

Beyond market risks, the IMF highlighted mounting threats from cyberattacks on critical infrastructure and significant shifts in the labor market. The fund estimates that 40% of jobs globally - and 60% in advanced economies - face exposure to AI.

To mitigate these risks, Georgieva urged regulators to tighten supervisory controls, bolster cyber defences, and reform tax policies to fund workforce retraining without penalising innovation.