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IMF and Bank of England join growing chorus warning of an AI bubble
Kristalina Georgieva, managing director of the International Monetary Fund (IMF), during a curtain raiser speech ahead of the International Monetary Fund (IMF) and World Bank Fall meetings at The Milken Institute in Washington, DC, US, on Wednesday, Oct. 8, 2025.
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The International Monetary Fund and Bank of England are the latest financial institutions to warn that global stock markets could be in trouble if investor appetite for artificial intelligence turns sour.
Speaking on Wednesday as finance ministers and central banks prepare to meet in Washington for the fund’s annual meetings next week, IMF chief Kristalina Georgieva offered some blunt advice to investors: “Buckle up: uncertainty is the new normal and it is here to stay.”
Georgieva said that while the world economy was projected to slow “only slightly” this year and next, there were “worrying signs” that market shocks could soon fully test global resilience.
She pointed to the surging global demand for gold, with prices of the yellow metal reaching $4,000 per ounce for the first time ever this week, as one example of investor anxiety.
The IMF chief also cited the full effect of U.S. tariffs and soaring stock market valuations, amid a period of AI-led euphoria, as two other cautionary signals.
“As for easy financial conditions — which are masking but not arresting some softening trends, including in job creation — history tells us this sentiment can turn abruptly,” Georgieva said.
Her comments came shortly after the Bank of England warned that the risk of a “sharp market correction” had increased, noting that valuations appear stretched, particularly for AI-focused tech firms.
In a record of its latest meeting minutes, the central bank on Wednesday said that “downside factors included disappointing AI capability/adoption progress or increased competition, which could drive a re-evaluation of currently high expected future earnings.”
The IMF and BOE join the likes of OpenAI’s Sam Altman, JPMorgan boss Jamie Dimon and Federal Reserve Chair Jerome Powell in warning about the risk of a stock market correction as AI spending surges.
Huge AI investments
Joost van Leenders, senior investment strategist at Dutch asset manager Van Lanschot Kempen, said it was likely a coincidence that the IMF and BOE warnings came on the same day, but it was clear that their messages fit a broader pattern.
“We’ve seen comments like this emerging over the past weeks or months I think, and we see the huge investments in AI, which casts doubt essentially over the profitability of this,” Van Leenders told CNBC’s “Europe Early Edition” on Thursday.
Asked whether a market correction appears to be imminent, Van Leenders replied: “That’s a good question. It’s hard to say. I think when you look at the valuations of the big U.S. tech companies, they are not excessive, for example on a forward P/E basis.”
Forward P/E refers to a stock valuation metric whereby a firm’s current share price is divided by its projected earnings per share (EPS) for the next 12 months.
“When you look at, for example, investment in AI and the growth in investment, and the fact that some of these companies are financing each other and buying each other’s stocks. I think those are also signals of a bubble,” Van Leenders said.
“So, if you think of a bubble of about five stages, we’re probably in stage three. As long as there is more demand for AI, which we see from companies and from individuals, I think it can continue. But how far is obviously the big question,” he added.
