Bank of England Governor Andrew Bailey has warned that heavy investment in artificial intelligence could lead to financial market shocks if expectations around the technology are not met. Bailey said the central bank is monitoring AI-related investment closely and is preparing for the possibility of asset price corrections.
Speaking to the BBC, Bailey said AI has “great potential to strengthen growth” but also brings substantial risks. His comments follow similar concerns raised in the Bank’s July 2026 Financial Stability Report, which examined how AI investment, financing and adoption could affect financial stability.
AI Valuations Face High Expectations
Hundreds of billions of dollars are being invested in AI infrastructure and companies, with Alphabet, Meta, Microsoft and Amazon among the biggest spenders. Nvidia, whose chips are widely used to train and run AI systems, is currently valued at about $5.5 trillion.
OpenAI and Anthropic are also preparing for potential U.S. stock market listings, which could bring hundreds of billions of dollars more into the sector. Bailey said rising company valuations reflect expectations that AI will deliver substantial economic and financial returns.
“Everybody is currently priced to be a winner,” Bailey said, while noting that previous technology markets did not produce winners across the board. He pointed to Netscape, an early leader in internet browsing that later disappeared, as an example.
Asked whether an AI investment bubble could burst, Bailey said there could be “some correction of asset prices at some point.” He said the Bank needs to ensure the financial system remains resilient if market shocks occur.
Cybersecurity and Deepfakes Add Further Risks
Bailey also highlighted cybersecurity risks from increasingly capable AI systems. He said the technology can identify vulnerabilities in software more effectively, which could make it a powerful tool when used for cyberattacks.
The governor has previously addressed these risks in a speech on AI and financial stability, calling for stronger international coordination around testing advanced AI models before widespread deployment.
Deepfakes present another concern. Bailey experienced the issue directly in June when fabricated images showing him fighting Nigel Farage circulated on X, and he said tracing the origin of such material remains difficult.
At the same time, Bailey said AI could help the Bank with its own work. He pointed to its potential to speed up analysis supporting the Monetary Policy Committee, which sets UK interest rates, while stressing that the technology would assist policymakers rather than make decisions itself.
Featured image credits: Wikimedia Commons
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