Alarms bells ring as Bank of England warns of ‘sharp market correction’ when AI bubble bursts (www.techradar.com)

The Bank of England’s Financial Policy Committee has warned that the “risk of sharp market correction” has risen as equity valuations—especially for AI-focused tech firms—look stretched, echoing earlier admissions by industry leaders that an AI bubble may be forming. Regulators and institutions including the IMF caution that if optimism about AI’s impact cools, highly concentrated market gains could reverse rapidly, tightening financial conditions and dragging down global growth, with outsized consequences for vulnerable economies. The warning is grounded in striking market and adoption data: JP Morgan’s Michael Cembalest estimates AI-related stocks have driven roughly 75% of S&P 500 returns, 80% of earnings growth and 90% of capital-spending growth since ChatGPT’s launch, and some research says AI capex overtook consumer spending as the main growth driver in H1 2025. Yet practical signals undercut the hype—reports claim 95% of generative-AI pilots fail, major vendor errors (e.g., Deloitte’s flawed government report) have led to refunds, and AI usage in large organizations may be declining. The combined picture raises a clear implication for the AI/ML community: investors and builders must reconcile lofty valuations with slow, uneven real-world ROI, or face a painful market correction that would reshape funding, deployment priorities, and regulatory scrutiny.