Threat of AI share crash puts world financial stability at risk, says IMF

The International Monetary Fund has warned that an AI sector crash poses a significant threat to global financial stability, citing sky-high valuations, excessive debt levels, and interconnected financing among major AI companies as key risks. The IMF identified an AI correction as one of three major "plausible near-term catalysts" for market turmoil, alongside rising government borrowing costs and cyber-attack threats, noting that Asia and the US would be most exposed while global spillovers could be severe. The fund cautioned that massive investments by hyperscaler firms may not deliver promised economic returns and that high leverage across companies, hedge funds, and retail investors could amplify the effects of any market downturn.