AI sector wipeout risks global financial contagion, IMF report warns

Watchers and reporters in the AI space have long pointed out how its circular economy could implode, potentially taking associated investments with it. The IMF has examined those fears in its latest Global Financial Stability Report, and its conclusions are stark. In the IMF's view, the global economy is becoming increasingly dependent on capital flows to the AI world, and a crash could result in harm to global GDP, investment, and consumption by 2028.

The report makes a distinction between "core" AI firms and others in the space. Presumably, core firms include companies like TSMC, Nvidia, and AMD, memory makers like SK hynix and Micron, and storage vendors like Western Digital. Those firms are seeing historical windfalls, and most of their production is currently spoken for years in advance. In other words, in this gold rush, these are the companies making bank selling the shovels.

In theory, if non-core players fail, only their investors would suffer harm, but according to …