In its latest financial stability update, the Bank’s financial policy committee said valuations for the leading AI firms have gone from ambitious to absurd, particularly among the Silicon Valley elite still promising digital miracles.
OpenAI, the darling of the AI hype machine, has seen its valuation skyrocket to $500 billion (£372 billion), up from $157 billion only a year ago. Rival Anthropic has nearly tripled in value since March, leaping from $60 billion to $170 billion. Even the cocaine nose jobs of Wall Street might find those figures hard to justify.
The committee warned that “The risk of a sharp market correction has increased and equity prices “appear stretched, particularly for technology companies focused on artificial intelligence.”
The Bank added that investors “had not fully accounted” for the chance that the AI fairy dust might settle without turning into gold.
If expectations sour, the FPC said, “a sudden correction could occur,” choking off funding to households and businesses as confidence drains away. Given the UK’s deep financial ties to global markets, any shock from a Silicon Valley implosion would land squarely in the City’s lap.
Adding to the jitters, new research from the Massachusetts Institute of Technology found that a staggering 95 per cent of organisations have seen no measurable return from their generative AI investments. The FPC warned that if investors cotton on to that awkward reality, markets could “re-evaluate currently high expected future earnings.”
The committee noted potential “bottlenecks to AI progress,” including power shortages, data constraints, and commodity supply snags,could derail the industry’s promised exponential growth.
It also pointed out that Trump’s ongoing trade spats have yet to reveal their full economic fallout. Between a bloated AI market and a White House that treats monetary policy like a campaign slogan, the Old Lady of Threadneedle Street seems to think the world’s financial system is walking a tightrope over a bonfire and someone just handed the match to a chatbot.