The BIS has warned that if unchecked, the surge in AI investment could overexpose the market and cause sudden capital withdrawals.
LONDON, June 30 – While some are calling this AI boom a mere bubble, the global financial landscape highlights that reckless enthusiasm can run into serious risks, and investors are increasingly avoiding overly risky expectations.
In its annual report on global financial conditions, BIS, the Basel-based Bank for International Settlements, said the scale of AI development was growing, but warned of possible “side effects” from overspending at peak times. In other words, it warned that the market could face a funding downturn if expected returns do not materialize.
US semiconductor stocks soared to record highs in the second quarter of 2026 as tensions between the US and Iran continue due to the conflict. This signals a new wave of AI infrastructure spending forecasts by industry giants, which is reinvigorating supply chains and causing microchip shortages.
Profitability could rise by almost 25% in 2026, experts say, with five industry giants expected to spend $1 trillion in capital spending this year. Analysts at Goldman Sachs believe the total could reach $7.6 trillion by 2031.
But questions remain among investors whether costs will really rise enough to cause a real turning point in the market. SoftBank’s Masayoshi Son has repeatedly emphasized that even talking about a “bubble” can devalue advances in AI, and that the future of the technology lies ahead.
“Calling this a bubble is an insult to AI,” Son said. “This is just the beginning. The potential of AI will be unlocked.”
– Masayoshi Son
Will AI eat itself? Risks to financial stability and capital markets
The BIS, the main financial regulator, is scrutinizing the risks to the resilience of the financial system that could arise from the huge spending boom on AI and the concentration of investment in a few large companies. The bank warned that too much competition could lead to overspending, which could lead to short-term growth, but the risk of misaligned inflated expectations could reduce overall returns on technology investments.
BIS also focuses on supply chains, with bottlenecks in power generation, grids and chip memory potentially forcing companies into long-term contracts to secure resources and making them vulnerable to future demand fluctuations.
The document also discusses the risk that artificial intelligence could essentially “eat” itself. If artificial intelligence eventually replaces a significant portion of labor and intelligence, the returns from its use could shift to investment in the technology itself, reducing household purchasing power. At the same time, demand will be the main limiting factor for further productivity gains and capacity expansion.
The bank emphasizes that this entire process requires careful and prudent risk management. If demand does not meet expectations, funding could contract sharply, turning the investment boom into a long-term downtrend and impacting global financial conditions.
In summary, BIS is calling for stronger risk assessments and not forgetting the potential challenges associated with demand overshoots, resource scarcity, and structural changes in income distribution in the age of AI.
The focus continues to be on financial stability and the long-term resilience of technological advances. A prudent approach to investment and careful evaluation of the actual benefits from AI spending can help maintain a balance between innovation and financial security.
