The seemingly unstoppable triumphal march of the artificial intelligence market could be about to hit a wall, a new Bank of England report suggests. The Financial Policy Committee (FPC) warned that “stretched” valuations and unproven profitability have increased the risk of a “sharp market correction.”
The march has been impressive, with the market capitalizations of AI leaders like OpenAI and Anthropic soaring to $500 billion and $170 billion. The FPC’s concern is that this advance is based on faith, not on conquered territory in the form of widespread profits.
The wall could be the hard reality of economic returns. An MIT study finding that 95% of firms are not yet profiting from AI represents a significant obstacle. The Bank fears the market will crash when it collides with this fact.
A second wall is being erected by political forces. The FPC sees Donald Trump’s attacks on the US Federal Reserve as a major barrier to continued financial stability, with the potential to trigger a chaotic “repricing of US dollar assets.”
The FPC concluded that the UK is directly in the path of any fallout. The “risk of spillovers… is material,” and a sudden halt to the AI march would have severe consequences for the British economy.