AI debt surge raises risk of sharp market correction, warns Bank of England - Financial Times

The Bank of England has flagged a rapid build-up of debt linked to artificial intelligence as a potential source of market instability, warning that it raises the risk of a sharp correction. The concern is not AI technology itself, but how it is being financed. Much of the investment in data centres, chips and computing capacity has been funded through borrowing, which magnifies both gains and losses.

For markets, the relevance lies in the transmission channels. If AI-related revenues or timelines disappoint, highly leveraged companies could face refinancing pressure, and lenders with concentrated exposure may tighten credit. That combination can turn an ordinary repricing into a faster, more disorderly move, particularly where valuations already assume strong future growth.

What to watch is whether credit growth tied to AI continues to outpace cash flows, and how regulators respond. The warning is a reminder that leverage amplifies sentiment in both directions, and that concentration risk deserves attention even when the underlying theme appears durable.