Bank of England Warns AI Boom Could Create Financial Stability Risks

The Bank of England has warned that the rapid expansion of artificial intelligence is creating financial and operational risks that could become more serious if expectations surrounding the technology fail to materialise. The Bank’s Financial Policy Committee said the growing amount of debt being used to finance AI infrastructure is increasing the exposure of investors and financial markets to developments in the sector. It also warned that a significant disappointment in AI earnings or adoption could trigger a sharp repricing of AI-related assets.

A major concern is the extraordinary growth in AI-related borrowing. Morgan Stanley estimates cited by the Bank put global AI-related debt issuance at about $450 billion as of early September 2026, more than twice the amount issued during all of 2025. The Bank said AI investment is increasingly being financed through debt, while private credit is also expected to play a growing role in funding data-centre construction. These increasingly complex financing structures can make it harder for investors and regulators to determine where risks ultimately sit.

The Bank is also concerned about what could happen if AI fails to deliver the level of productivity and economic growth currently expected by investors and governments. High valuations across AI-related companies have created significant expectations about future earnings, while companies are committing enormous amounts of capital to chips, data centres and computing infrastructure. If those expectations are substantially reduced, the resulting decline in AI-related assets could spread into credit and sovereign debt markets.

Bank of England Governor Andrew Bailey separately warned about the risks posed by increasingly capable AI models, particularly their potential to create cybersecurity and operational threats. Recent incidents involving autonomous AI systems taking unexpected actions in controlled environments have increased policymakers’ concerns about whether existing safeguards will remain effective as models become more powerful. Bailey argued that authorities need rigorous testing and credible intervention points before considering more formal regulation.

The Bank’s warning does not mean it believes the AI sector is heading for an immediate collapse. It said the financial system has remained resilient so far, even as bond yields and AI-related investment have increased. However, the combination of high AI valuations, rapidly expanding debt, complex financing structures and increasingly autonomous AI systems means that a major shock could have consequences beyond the technology sector. The Bank therefore wants financial institutions and regulators to prepare for these risks before they become difficult to contain.