Bank of England flags risk of 'sudden correction' in tech stocks inflated by AI (www.ft.com)

The Bank of England warned that tech stocks — many buoyed by investor excitement around generative AI and related breakthroughs — may be vulnerable to a “sudden correction” if market expectations outpace companies’ actual revenue and profit delivery. The central bank flagged valuation inflation concentrated in a handful of large-cap AI leaders and exchange-traded funds, noting that a sharp re-pricing could ripple through leveraged positions, passive funds and derivative markets, amplifying market volatility and tightening financial conditions more broadly. For the AI/ML community this matters because it could change the funding and operating environment: inflated public valuations have supported high private valuations, M&A activity and aggressive investment in productization. A disorderly sell-off would likely constrain venture funding, slow IPO windows and increase investor scrutiny on unit economics, deployment costs and demonstrable model value. Technically, the risk centers on stretched price-to-earnings multiples, concentration risk in index-cap-weighted instruments, and feedback loops from margin calls and ETF flows — all of which could shift emphasis from hype to fundamentals like sustainable revenue models, reproducibility, and cost-effective model scaling.