Global stock rally at risk as AI investment concerns mount: BIS

The artificial intelligence-driven rally that has lifted global stock markets over the past two years is showing increasing signs of vulnerability as investors grow more cautious about the profitability of future AI investments, the Bank for International Settlements said on Monday, Reuters reported.

The BIS, a global umbrella body for central banks, said concerns were particularly focused on rising leverage among major U.S. technology companies and the growing amount of debt being used to finance AI-related investments.

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According to Reuters, the BIS said the momentum behind AI had helped support equity markets and contributed to the resilience of the global economy, but emerging risks could challenge the rally's durability.

AI-linked stocks came under pressure on Monday after several leading AI executives called for a slower pace of development, citing concerns over the potential risks posed by increasingly advanced technology.

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Rising Debt Adds to Market Risks

The BIS also highlighted the broader global backdrop of strained public finances, geopolitical tensions and volatile energy prices as potential sources of financial instability.

The rapid increase in borrowing by AI companies is another concern. According to the BIS report cited by Reuters, AI firms have issued hundreds of billions of dollars in debt, potentially adding to pressure on government bond markets and contributing to higher borrowing costs.

The report said investors' risk appetite has remained resilient despite these challenges, and there were no broad signs of financial market stress. However, the BIS warned that this resilience could be tested if upward pressure on bond yields continues.

Private Credit Exposure to Technology Surges

The BIS also examined the growing role of private-market financing in the technology sector.

Aggregate borrowing by technology companies increased from about $22 billion, representing 22% of total private credit in 2010, to more than $1 trillion, or 44%, in 2025, according to the report. Total outstanding loans to technology firms across different forms of financing stood at nearly $2.5 trillion, Reuters reported.

The BIS identified the rapid increase in debt and leverage in the AI sector as a key financial stability concern. It also pointed to the complexity and limited transparency surrounding some AI financing arrangements, including structures involving off-balance-sheet borrowing and interconnected transactions.

The warning comes as investors pour unprecedented amounts of capital into AI infrastructure, data centres, computing capacity and related technologies, raising questions about whether future earnings growth will be sufficient to justify the scale of investment.

Central Banks Face Communication Challenges

The BIS report also examined how central banks communicate about inflation. One of its studies used artificial intelligence to analyse thousands of central bank speeches and reports.

The analysis found that central banks are increasingly referring to measures of core inflation that remove the effects of volatile energy prices. It also found greater variety in the inflation measures and terminology used in central bank communications.

According to Reuters, the BIS said the shift partly reflected changing economic conditions, but warned that increasingly complex central bank messaging could make it harder for policymakers to communicate effectively with the public.

The BIS has repeatedly warned in recent years about elevated global debt levels and stretched asset valuations. Its latest assessment adds AI-related leverage to a list of risks that could become more significant if market valuations, borrowing costs and economic uncertainty remain elevated.