AI investment boom risks a protracted bust, BIS warns

The BIS warns that the current AI funding surge—driven by hyperscalers and backed by debt-financed infrastructure—could reverse if expected productivity payoffs don’t materialize, triggering a protracted investment bust, tighter credit, strain on suppliers and data-center builders, and a wider global market pullback, especially if inflation remains elevated. While AI could boost productivity, achieving it may require navigating a historically complex and potentially vulnerable investment cycle.