BIS warns AI spending boom could test markets

The Bank for International Settlements warned that the surge of AI investment behind record global stock markets could end in a financial bust if expectations reverse. In its Annual Economic Report, the institution said enormous spending on AI is building vulnerabilities that could amplify future shocks and spread from markets into the wider economy. BIS general manager Pablo Hernández de Cos called the message one of “urgency” and urged policymakers to act before any reversal becomes more painful.

The BIS pointed to the scale and structure of the build-out. The five largest “hyperscalers” are on track to commit more than $1 trillion (€878bn) to AI-related investment across 2025 and 2026, outpacing earnings and free cash flow and pushing some firms toward heavier borrowing. It also flagged “circular financing”, where chipmakers and cloud companies invest in AI labs that then buy their chips and computing power, while more funding shifts through hedge funds and private credit vehicles.

Risks are also surfacing in data centre accounting, component prices and power demand. Stijn Van Nieuwerburgh estimates the build-out could cost in the region of $8 trillion (€7tn), partly through off-balance-sheet arrangements. Apple raised prices on devices after an “extraordinary surge in demand for memory and storage”, and its shares fell around 6%. Goldman Sachs expects data centres to drive nearly half of US electricity-demand growth by 2030, with consumer power prices forecast to rise around 6% a year through 2026 and 2027.