Andrew Bailey has sounded the alarm over soaring technology valuations as unprecedented investment pours into artificial intelligence companies.
The Bank of England governor has warned the artificial intelligence investment boom could trigger shocks across financial markets, cautioning soaring valuations are based on expectations that cannot make every company a winner.
Andrew Bailey added the central bank was watching the vast sums pouring into AI “very carefully” as technology companies and investors commit hundreds of billions of dollars to the sector.
His warning comes as the Bank has stepped up scrutiny of stretched AI-related share valuations and the potential consequences for Britain if investor expectations suddenly change.
Asked by the BBC whether an AI bubble could burst, Andrew said: “You could see some correction of asset prices at some point.”
He stressed AI nevertheless had “great potential to strengthen growth in our economies”, adding this was something Britain needed.
Andrew said: “But it also brings with it substantial risks and so we have to be on top of both of those.”
The comments come during an extraordinary expansion in spending on the infrastructure, chips and computing power required to develop AI.
Nvidia, led by Jensen Huang, has become the dominant supplier of processors used to train AI systems and is valued at about $5.5 trillion.
The company recently approved a record $150 billion expansion of its share buyback programme, taking its total repurchase capacity to $235 billion through 2028.
Alphabet, Meta, Microsoft and Amazon have also committed enormous sums to AI, while Anthropic and OpenAI are among the private AI businesses whose valuations and future stock-market plans have attracted intense attention.
Anthropic has filed for an initial public offering targeting a valuation of as much as $2 trillion, according to Reuters, while its prospectus reveals hundreds of billions of dollars in infrastructure commitments and substantial financial losses.
Andrew said: “There is a large, very large, amount of investment going into this sector now, and of course that’s natural because it’s a major area of growth.
“And of course you see that the asset prices of the companies that are developing it have gone up a lot and that reflects the fact that there are high expectations of what it can deliver.”
He added: “Everybody is currently priced to be a winner.”
But Andrew pointed to the history of the technology industry as evidence that early market leaders do not necessarily retain their dominance.
He said: “You look back at the past, not everybody is a winner.
“Google was not the first market leader in internet search. It was Netscape. Nobody can remember Netscape today. It doesn’t exist. So not everybody always wins.
“We are prepared for the fact that there will be, I think, some shocks come along to markets and we have to deal with that. We have to make sure the system is resilient.”
The warning follows analysis published by the Bank in its July Financial Stability Report, which found valuations of AI companies had risen faster than broader equity indices and warned that increasing concentration in AI-related stocks could amplify the consequences of a revaluation.
Bank of England governor warns AI boom could deliver market shocks
