Lagarde Warns AI Debt Boom Could Create Financial Risks

European Central Bank President Christine Lagarde has highlighted the growing financial implications of the artificial intelligence boom, saying AI is already becoming significant enough to affect investment, credit growth, labour markets and inflation. Speaking at a European Parliament hearing on September 28, 2026, Lagarde said firms are expected to devote around 10% of total investment to AI this year, while AI-related borrowing accounts for roughly a quarter of credit growth to firms.

The rapid expansion is being driven by enormous spending on data centres, computing infrastructure, chips and other equipment needed to develop and operate advanced AI systems. The Bank of England has separately reported that AI companies have increasingly turned to public debt, private credit, leveraged finance and other forms of external funding. It said the pace of investment is historically unprecedented and that AI-related companies’ use of credit markets accelerated substantially during the first half of 2026.

The concern is not that AI investment will necessarily fail, but that the financial system could become exposed if expected profits and productivity gains do not materialise quickly enough. The Bank of England noted that AI-related equity valuations have risen rapidly and that a reassessment of future earnings could lead to falling asset prices, particularly because investment is concentrated among a relatively small number of major technology companies.

Debt financing is becoming particularly important as AI infrastructure requirements continue to increase. The Bank of England said estimates for AI hyperscalers’ capital expenditure in 2028 have risen from below $600 billion to more than $1 trillion, while the OECD estimated that the share of private-credit financing going toward AI investment increased from 9% in 2024 to 34% in 2025. The central bank warned that increasingly complex and opaque debt structures could make it harder to identify where financial risks ultimately sit.

At the same time, Lagarde stressed that AI could bring substantial benefits to productivity, competitiveness and living standards. The issue for policymakers is therefore how to manage the financial risks associated with the investment boom while allowing the technology’s potential economic benefits to develop. Other financial authorities have raised similar concerns: the Bank for International Settlements recently warned that the rapid expansion of AI investment and its reliance on debt could create vulnerabilities if expected returns fail to materialise.