PANews June 28 news, according to the Financial Times, the Bank for International Settlements (BIS) warned that Big Tech’s massive spending spree on artificial intelligence could end in a disruptive and long-lasting “investment bust,” disrupting financial markets and hurting global economic growth.

In its annual economic report released on Sunday, the BIS spelled out the risks of the “current AI frenzy,” stating: “If returns disappoint, it could trigger a sudden contraction in financing, turning the capital spending boom into a lasting investment bust, with potential knock-on effects on financial conditions.” The warning comes amid mounting concern over the scale of equity and debt financing fueling the AI revolution and the turbulence it may cause in global markets. Tech groups have poured into global credit markets, taking advantage of corporate credit spreads near their lowest levels this century to raise hundreds of billions of dollars to fund AI projects.

Record share prices have also lured them into the U.S. stock market — SpaceX’s blockbuster $86 billion IPO earlier this month being a prime example of strong demand for AI-related stocks.

Large investors have already warned that this rush to issue debt could test investors’ capacity to absorb it, especially if AI investments fail to deliver sufficient returns. Since SpaceX’s listing, stocks have swung wildly, while investors have also digested rising expectations of Federal Reserve interest rate hikes. Allianz’s investment chief warned this week that SpaceX’s decision to issue $25 billion in bonds so soon after its IPO is a signal that markets have entered “bubble territory.”

The BIS also noted that, so far, AI optimism has provided a significant boost to global growth. The report acknowledged that AI has the potential to “significantly” raise productivity over the next decade, given the efficiency gains it can bring to businesses.

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