Bailey Warns G20 an AI Bubble Collapse Could Spread Worldwide
Bank of England governor Andrew Bailey warned G20 finance ministers that markets “remain vulnerable to a potentially disorderly correction that could spread across borders”, citing leverage interacting with “high valuations and market concentration” and “increasing cross-investment between AI companies and hyperscalers” — alongside energy shocks from the Iran war. The same day, Chancellor John Healey announced a £100m sovereign AI fund for British start-ups targeting NHS waiting lists, cybersecurity and defence.
The juxtaposition is the story: Britain’s central banker warning the world about the AI bubble on the morning its chancellor announced public money to inflate a British corner of it — both positions defensible, together a portrait of every government’s dilemma. Mr Bailey’s specific worry deserves attention beyond the headline: the circular financing between AI firms and the cloud giants who are simultaneously their investors, customers and suppliers means valuations rest partly on money passed hand to hand — the structure, if not the scale, of historical manias. Nvidia’s $96bn quarter last week is either the refutation or the peak, depending on which side of the correction one eventually stands. Watch the FSB’s follow-up work — and whether £100m buys Britain resilience or exposure.