IMF Warns AI Stock Crash Risk Endangers Global Financial Stability

In its semiannual Global Financial Stability Report, the International Monetary Fund warned that the risk of a sharp correction in AI stocks is endangering global financial stability, with consequences that could spread worldwide. The report lists an AI stock crash, rising government borrowing costs, and large-scale cyberattacks as three prominent risks, calling them reasonable catalysts for a sharp tightening of financial conditions and market turbulence in the near term. The IMF noted that AI companies' valuations are high and debt is accumulating; if AI investment or profitability weakens, it could trigger a correction in AI-related asset prices, amplified by rising leverage, concentrated exposures, and circular financing arrangements. Outside the United States, Asian markets have the largest exposure; the UK and the euro area are relatively more protected, but their investors holding U.S. assets would still be affected. The seven tech giants—Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla—account for more than 35% of the S&P 500 index weight, up from 12% a decade ago, and their combined market capitalization has grown more than 50% in two years.