Bank of England governor warns that overvalued AI stocks could trigger a bubble burst
Andrew Bailey, Governor of the Bank of England, said in a lecture series speech at the University of Zurich's Institute of International Studies that AI-related stocks face a risk of an “asset price bubble in AI,” and that companies may be overvalued by the market, or investor returns may be realized later than market expectations. Bailey said that there are good reasons to believe that the world moves faster now, but still the timing may not live up to market expectations. He said that these factors could lead to a bubble burst, thereby threatening the UK's financial stability.
Bailey also stressed that frontier AI has increased the risk of cyberattacks, and called for broader testing before and after model releases, as well as improvements to incident reporting and monitoring mechanisms. He said he remains optimistic about AI, digital technology, and robotics, believing these technologies have the potential to raise sustainable growth rates in multiple economies by improving productivity, but that financial stability risks make them issues central banks must pay attention to.
Previously, the Bank of England's Financial Policy Committee had repeatedly pointed out in quarterly reports that elevated valuations of AI-related stocks, the rapid rise in debt financing, and increased market concentration could magnify the scale of future corrections.
Original source:
Title: Overvaluing AI stocks may cause ‘bubble’ to burst, warns Bank of England boss
Publisher: The Independent
Publication date: 2026-11-09
URL: https://www.independent.co.uk/news/business/andrew-bailey-bank-of-england-national-cyber-security-centre-britain-b3081974.html
Source nature: Reporting by a British mainstream media outlet on the central bank governor's speech
Verification status: The full text has been read; the core quotation and content are consistent with descriptions of the same Zurich speech in other English-language media (City AM, EconoTimes, etc.); no official full transcript was found publicly, but the reported quotations are consistent.
Supporting content: Confirms that Bailey warned AI stocks may be overvalued, returns may take longer than expected, there is a risk of a bubble burst, and financial stability may be affected; it also mentions cyber risks and an optimistic view of the technology's potential.
ABAB AI Insight
Bailey's remarks continue the Bank of England's sustained focus on AI valuations in its financial stability reports since 2025. The Financial Policy Committee had previously pointed out that AI-related companies account for a significant share of some global indexes, and that debt financing has expanded rapidly, with estimates showing that related debt issuance in 2026 had already far exceeded the previous year, increasing capital markets' sensitivity to AI developments.
The governor specifically framed the risks as two mechanisms: overvaluation and returns being realized later than expected, rather than simply asserting that a bubble would inevitably burst. Using the spread of electricity and Netscape as examples, he said that general-purpose technologies have historically often seen concentrated winners and early leaders being replaced, in contrast to the current market state in which everyone is priced as a winner.
For the UK, direct exposure to AI stocks is lower than in the US market, but through spillovers from global equities, reactions in bond markets, and changes in investor risk appetite, domestic financial conditions and economic growth could still be affected. The Bank of England previously modeled that a significant correction in AI stocks could have a quantifiable impact on UK GDP.
While warning about the risks, Bailey clearly said he remains optimistic about the long-term productivity gains from technology, and emphasized that central banks need to address both growth opportunities and financial stability challenges. This statement positions the AI issue as a macro-financial risk that requires ongoing monitoring, rather than calling for immediate targeted regulatory intervention.
ABAB News · Cognitive Law
The central bank's warning focuses on the possibility that a mismatch between valuations and the timing of returns could amplify corrections, rather than predicting a market crash at a specific point in time.
The combination of rapidly growing AI-related debt financing and elevated stock valuations raises cross-market transmission risks if progress in a single sector falls short of expectations.