TL;DR
The BIS warned that investing in artificial intelligence could disrupt credit, as it did in 2008, citing cyclical funding and poorly disclosed risk in its annual report.
The Bank for International Settlements warned on Sunday Investing in artificial intelligence could hit credit markets with disruptions comparable to the 2008 financial crisis, he said. In its annual report, the Basel-based institution highlighted inflation and fiscal stress as well as artificial intelligence-based risks “pressure points“that”requires attention.“
“Disappointment in returns can lead to a sudden pullback in financing, turning capital growth into a long-term investment crisis with a potential hit to financial conditions.“BIS said. He added that “a major stock market correction can have greater macroeconomic consequences today than in the past.“
The report highlighted what it was calledcrowdfunding” as a particular vulnerability. Chipmakers and hyperscalers take equity stakes in AI labs or neocloud providers, which in turn commit to buying multi-year chips or computing power from those investors. Data center construction is increasingly outsourced to third parties that lease facilities under long-term contracts.The terms of such deals are usually poorly disclosed, the risks of the same asset are pledged multiple times,“BIS wrote. The financial complexity of the AI boom is growing through record bond issuance, measured price changes and export controls combined in June.
The BIS warned that a reassessment of risk, “whether driven by high interest rates or the loss of AI, has similarly disruptive potential” to credit markets such as the 2008 global financial crisis.
BIS chief Pablo Hernandez de Jose highlighted inflation as a compounding risk, pointing to a cost-of-living shock for 2022.still in the memory of economic agents,“This raises the possibility of second-round effects from the current power cuts in the Middle East. The report also notes sovereign debt vulnerabilities, suggesting that hedge funds”highly effective strategies based on short-term financing“They are now playing a bigger role as buyers of government bonds, creating ‘fire sale risks’ and eliminating feedback loops.
The annual report comes ahead of the European Central Bank’s three-day symposium in Sintra, where global policymakers will scrutinize many of the same stability risks. The concentration of AI stocks is already exceeding dot-com-era levelsthe ten largest S&P 500 companies make up 36%-40% of the index. The BIS’s message is that the financial architecture underpinning the AI boom carries systemic risk, not just stock valuations, that regulators are yet to fully map.
