AI debt surge raises risk of sharp market correction, warns Bank of England - Financial Times

The Bank of England has flagged a build-up of debt linked to artificial intelligence as a potential source of instability, warning that a rapid unwinding could trigger a sharp market correction. According to the Financial Times, the concern centres on the scale of borrowing underpinning AI-related investment and how quickly that exposure has grown.

The warning matters because AI has been a dominant driver of equity valuations and corporate capital spending. When an investment theme is financed increasingly by debt, the risk profile changes: rising interest costs or weaker-than-expected returns can force retrenchment, and correlated positions can amplify selling pressure across markets.

For observers, the key questions are how concentrated this borrowing is, who holds it, and whether lenders have adequate buffers. Watch for further regulatory commentary, credit conditions facing AI-linked firms, and any signs that earnings or cash flows are failing to match the pace of investment. None of this predicts a correction — but it highlights where vulnerabilities may be building.