AI bubble could burst and take global economy with it, IMF warns

The International Monetary Fund (IMF) has become the latest financial heavyweight to warn that the AI spending frenzy could end in tears, with consequences extending well beyond the tech sector. In its latest Global Financial Stability Report, published on Tuesday, the IMF warns that financial markets are increasingly exposed to an AI-driven correction, especially if the billions poured into the tech fail to deliver the profits investors expect. AI investment has helped keep markets and economic growth ticking along, but the IMF fears the boom could quickly turn to bust if the promised profits fail to materialize. With tech giants borrowing billions and investors piling into the same handful of companies, a selloff could leave more than just Silicon Valley nursing a hangover. The watchdog is also concerned about circular financing arrangements, in which AI firms act as one another's investors, financiers, and customers. …