IMF warns AI share correction and $1.4tn circular deals threaten financial stability
The International Monetary Fund warned in its twice-yearly Global Financial Stability Report that an AI-related share price correction is one of three "salient risks" to global financial stability, alongside rising government borrowing costs and a major cyber-attack. Reviewing 14 publicly disclosed deals since 2023, the IMF found hyperscaler-led investors put in about $300bn of equity and $650bn of debt in exchange for $1.4tn in future revenue commitments, a "wrong-way risk" where equity and debt can lose value exactly when the revenue tied to them is impaired. It added that hyperscalers now issue about 10% of the world's investment-grade bonds, up from less than 1% in 2024, while hedge fund and retail leverage has grown, so a downturn could trigger forced selling and volatility, hitting advanced Asian markets hardest and reaching the UK and euro area through their US holdings.
It offers an official, quantified view of the circular financing and leverage behind the AI build-out, a key input for judging how durable that spending really is.