The Bank for International Settlements warned that enormous spending on AI is accumulating financial vulnerabilities that could amplify any future shock and spread from markets into the wider economy.
The BIS general manager, Pablo Hernández de Cos, said the message was one of urgency, with policymakers urged to act before any reversal makes the eventual adjustment more painful.
The five largest hyperscalers are on track to commit more than $1 trillion to AI-related investment across 2025 and 2026, outstripping their earnings and free cash flow and pushing some to borrow heavily to keep up.
This pace is driven by a belief that only a handful of dominant players will ultimately prevail, encouraging firms to pour money into projects whose returns remain deeply uncertain.
The report sets today’s AI boom against a long historical lineage, from the canal mania of the 1830s and Britain’s railway mania of the 1840s to the electrification of the 1920s and the dotcom bubble, each beginning with a genuine technological breakthrough that attracted more capital than commercial returns could justify.
The BIS highlights the spread of circular financing, in which chipmakers and cloud giants take equity stakes in AI labs that then commit to buying their chips and computing power, a move that could lead to a sharper, faster crash than a traditional banking crisis if the AI sector experiences a downturn.
A central concern is how the technology giants account for their data centres, as they assume the expensive equipment inside will stay useful for longer.
By doing so, firms can spread the cost over more years, lowering the depreciation charged against profits in any given period and making earnings look healthier than the underlying cash burn implies, a tactic that may not be sustainable in the long term.
However, the specialist chips at the heart of these facilities may become obsolete far faster than those extended schedules assume, leaving a gap between reported profits and economic reality.
The physical scale is staggering, with data centres requiring significant amounts of power.
The costs are also no longer confined to corporate accounts, as some economists warn of a so-called third wave of inflation, driven this time by the AI build-out.
The BIS notes that the build-out’s hunger for electricity is already pressuring prices and input costs, with potential spillovers to inflation.
The true cost of the AI build-out is being obscured in plain sight.
They stress that AI could yet prove disinflationary if its promised productivity gains eventually arrive.