OpenAI CEO Sam Altman triggered a tech selloff in late August when he mentioned the word “bubble” in response to a reporter’s question. Two months—and several centibillion-dollar deal announcements later—Jeff Bezos was talking openly about markets being in some kind of an “industrial bubble,” while insisting that the explosion of investment in artificial intelligence infrastructure would be worth it in the future. Now the Bank of England is throwing around the B-word, albeit in the understated style typical of a central bank.
In its quarterly update on Oct. 8, the Bank of England’s Financial Policy Committee (FPC) issued a stark warning over the feverish investor enthusiasm surrounding AI, saying that “equity valuations appear stretched,” especially in certain backward-looking metrics in U.S. stocks and technology companies focused on AI. When combined with increasing concentration within market indices, the FPC added, equity markets find themselves “particularly exposed should expectations around the impact of AI become less optimistic.” Since its last meeting in June, the FPC noted that risky asset valuations had increased as credit spreads had compressed, as it questioned these stretched valuations.
