The Bank for International Settlements (BIS) has expressed concerns regarding the stability of the current AI-driven market rally. Frank Smets, head of economic analysis at the institution, noted that the two-year growth in equity gains may be supported by excessive leverage and opaque financing structures.
Alphabet, Amazon, Meta, Microsoft, and Oracle are expected to invest over $1 trillion in AI-related capital expenditures during 2025 and 2026. The BIS report from June 2026 compares this surge to historical speculative bubbles, such as the dotcom era, where capital inflows outpaced actual returns.
The organization highlighted risks in private credit markets, where exposure to the technology sector exceeded $1 trillion by 2025, accounting for 44% of the total market. This is a significant increase from $22 billion, or 22% of the market, recorded in 2010.
BIS officials warned that a potential disappointment in AI returns could trigger a sharp financing pullback. Such a correction would likely extend beyond equity valuations, potentially tightening lending conditions across various sectors of the broader economy.
