The artificial intelligence (AI) boom and the risk of a correction are emerging as major global credit risks, ratings agency Fitch has warned, adding to growing concerns that soaring tech valuations and unprecedented AI spending might be running ahead of uncertain future returns.In its third-quarter Global Risk Outlook, Fitch said the credit backdrop remains dominated by two short-term risks: mounting vulnerability to an AI-related market correction and continued uncertainty linked to the US war on Iran.The ratings agency echoed warnings from global watchdogs that the AI boom has become increasingly snarled with economic growth and with capital markets, particularly in the US, raising the risks of any major selloff.
The Fitch Ratings logo and a stock graph are seen in this illustration taken in 2025.
“The scale of AI investment is such that the exposure of the economy and overall capital market to such a correction is significant,” Fitch said.The warning, which is the bluntest so far from any major ratings firm, came as Asia’s AI-linked stocks tanked again on Tuesday amid the worries about who’s paying for the spending boom and evidence of growing competition from China.
Fitch’s report highlighted that the US S&P 500’s cyclically adjusted price-to-earnings ratio has climbed to levels close to those seen during the 1990s dotcom boom, while US corporate bond issuance surged 26 percent in the first half of this year, driven largely by AI-related fundraising.Amazon.com Inc, Alphabet Inc, Nvidia Corp, Meta Platforms Inc, Oracle Corp and SpaceX together issued US$182 billion of investment-grade bonds, while capital expenditure by Alphabet, Amazon, Meta and Microsoft Corp is projected to jump more than 75 percent this year to US$700 billion, Fitch said.It said that booming IT investment directly added 1.4 percentage points to first-quarter US GDP growth, while rising equity prices have supported household spending through a wealth effect.Uncertainty over future AI revenues, regulation, competition and labor-market disruption could trigger a potentially significant and prolonged market correction, with widespread macroeconomic implications.“The extent to which capital markets and economies have become intertwined with AI have created a vulnerability for credit,” Fitch said.Geopolitical risk remains the other major concern, especially with renewed fighting between the US and Iran and a fresh closure of the Strait of Hormuz.Fitch expects world growth to slow to 2.4 percent this year and forecasts US inflation would end the year at 3.7 percent, reflecting the impact of higher energy prices.It said a strong El Nino weather pattern as an emerging credit risk, given the likelihood of droughts, floods and severe storms.The ratings agency warned the phenomenon could compound the inflationary pressures linked to the US war on Iran. Highly indebted, “junk” rated countries would be particularly vulnerable, it added, as food-price spikes could complicate monetary policy, increase subsidy costs and further strain public finances.
