The High Price of Hype: AI Stock Boom Seen as a Major Risk to Economic Stability

The global economy’s stability is being threatened by the high price of hype, with a major new report identifying the AI-driven stock boom as a significant risk. The analysis warns that “stretched valuations” have created a fragile situation where a “correction” could lead to a “sharp” fall in investment and damage overall growth.
This financial fragility is a key reason why the institution describes the global outlook as “dim,” even as it upgrades the 2_025_ growth forecast to 3.2%. The report notes that investment in data centers and AI has been a major contributor to recent economic performance, making the world economy particularly vulnerable if investor sentiment sours on the technology’s immediate prospects.
This warning about a potential AI bubble is part of a broader assessment of risks. The report reiterates that the full, negative impact of US trade tariffs has been delayed and is still expected to hit business confidence hard. The combination of financial froth and trade friction creates a precarious environment.
The United Kingdom’s economy is not immune to these global shocks. While its growth has been modestly upgraded to 1.3%, it faces its own severe challenge with the G7’s highest projected inflation rate. A global market downturn would only complicate the Bank of England’s efforts to stabilize the domestic economy.
The report also highlights the economic drag from restrictive immigration policies as another factor weighing on the future. The overarching message is that while technology has provided a recent boost, the hype may have run ahead of reality, creating a new and potent source of risk for the entire global system.