The Bank for International Settlements warns debt-fueled AI investments could trigger cascading defaults if valuations falter.
The Bank for International Settlements cautioned that $1 trillion in planned AI capital expenditures by 2026 may pose systemic risks. Heavy reliance on debt and leveraged nonbank financing could lead to rapid unwinding if investor sentiment shifts, the report said.
AI spending by the five largest hyperscalers is outpacing earnings growth, mirroring historical boom-bust cycles like the dot-com bubble. Equity valuations for AI-focused firms remain elevated, though sustaining such growth may prove difficult, the bank noted.
Recent IPOs, including SpaceX, and upcoming listings from Anthropic and OpenAI have fueled enthusiasm, but parallels to past financial excesses raise concerns. The BIS also highlighted persistent inflation risks in 2026 as a compounding factor.