AI BUST POSES MAJOR RISK TO GLOBAL GROWTH

The Bank for International Settlements (BIS) has flagged an AI market collapse as a critical economic risk alongside persistent inflationary pressures and mounting government debt concerns. An AI bust could trigger cascading effects across financial markets and economic growth trajectories, the institution cautioned. Excessive investment in AI infrastructure and overvalued tech companies could unwind rapidly, destabilizing credit markets and reducing capital availability for other sectors. Inflation remains problematic despite recent cooling trends, while fiscal stress—from pandemic-era stimulus and rising interest rates—strains government budgets globally. These three challenges compound each other: slower growth from an AI downturn would reduce tax revenues, worsening fiscal positions, while credit market disruptions could limit policy options. The BIS recommended policymakers prepare contingency plans and maintain vigilance over AI sector valuations and leverage. Central banks face pressure to balance supporting growth while preventing speculative bubbles that could unwind catastrophically.