AI Valuations Soar: BoE Warns of Market Correction Risks

The Bank of England has issued a stark warning about the potential for a global financial downturn, driven by investor concerns over artificial intelligence and the independence of the U.S. Federal Reserve. With share valuations on U.S. stock markets reaching levels reminiscent of the dotcom boom, the risk of a market correction is palpable.

According to the BoE's Financial Policy Committee, led by Governor Andrew Bailey, the threat of an AI-related market slump poses a 'material' risk to Britain's financial system. A loss of credibility in the Federal Reserve could lead to sharp repricing of U.S. assets, impacting global markets.

While domestic financial stability risks in the UK remain relatively unchanged, the BoE highlighted concerns about cyberattacks and geopolitical factors. Despite these challenges, the S&P 500 continues to rise, reflecting ongoing optimism in the U.S. tech sector.

(With inputs from agencies.)