Bank of England Warns of AI Company Valuation Risks

According to BlockBeats, the Bank of England has issued a warning regarding the soaring valuations of artificial intelligence companies, which have reached levels comparable to the internet bubble era. This surge is heightening the risk of a 'sudden correction' in global financial markets. The Bank of England highlighted recent defaults in the U.S. auto credit market as exacerbating the risk of market reversals. These events underscore the risks inherent in market-based financial systems, as emphasized by the central bank. Additional risks include escalating political pressure on the Federal Reserve, which could lead to a dramatic repricing of dollar assets, and political deadlocks in France and Japan, which may disrupt debt markets. The central bank noted that several indicators suggest stock market valuations are excessively high, particularly for technology companies focused on artificial intelligence. This situation, coupled with increased concentration in market index components, makes the stock market particularly vulnerable if expectations regarding AI's impact turn pessimistic. This represents the Bank of England's clearest warning to date about the potential bursting of an AI-driven market bubble. In its July financial stability report, the bank had only mentioned AI from the perspective of risks associated with financial institutions utilizing the technology.