IMF warns an AI spending bust could shake global financial markets

The International Monetary Fund warns in its latest Global Financial Stability Report, published on Tuesday, that financial markets are increasingly exposed to an AI-driven correction. According to The Register, the IMF's concern is that the billions invested in AI may not produce the profits investors expect. AI investment has helped support markets and economic growth, but the IMF warns that the boom could turn to bust if those returns do not materialize. It points to two weak spots. Large technology companies are borrowing billions of dollars to fund AI buildouts, and investors have piled into the same small group of companies. Because of this concentration, a selloff could spread beyond the tech sector into the wider financial system. The report also lists mounting debt and cyberattacks as further risks to financial stability. The IMF joins other financial institutions that have raised similar concerns. Its warning matters because policymakers and regulators use the report to judge risks across the system. It also comes as AI companies and their suppliers keep announcing large capital commitments and funding rounds.