“Central bank of central banks” raises an AI bubble alarm: a trillion-dollar capital expenditure spending frenzy could turn into a prolonged crash.

The Bank for International Settlements (BIS) warns that the AI investment frenzy led by tech giants could turn into a "protracted investment bust," shaking global financial markets and damaging the world economy. The BIS, known as the "central bank of central banks," has directly pointed to the excessive exuberance in the current AI market, a clear risk warning from one of the world's most authoritative financial institutions.

In its annual economic report released on Sunday, the BIS stated that the world's five largest "hyperscaler" cloud computing companies are expected to have combined capital expenditures exceeding $1 trillion between 2025 and the end of 2026. If actual returns in the tech sector fall short of expectations, investors could quickly tighten funding, turning this capital expenditure boom into a "protracted investment bust" with ripple effects on global financial conditions.

According to a report by the Financial Times, there are already signs of market instability. SpaceX completed an $86 billion IPO this month and immediately launched a $25 billion bond issuance. The chief investment officer of Allianz warned this week that this move is a signal that the market is entering "bubble territory." Since SpaceX's listing, the stock market has continued to fluctuate, coupled with rising expectations of a Fed rate hike, and investor sentiment has clearly turned cautious.

The BIS also warns that the energy shock caused by the US-Iran war and the near-closure of the Strait of Hormuz trade route has not yet fully subsided, and the inflationary impact "has already begun to show and may persist for a long time," posing multiple threats to the global economy alongside the AI bubble risk.

Behind trillion-dollar capex, returns remain uncertain

The core contradiction of the current AI boom lies in the gap between massive capital investment and uncertain commercial returns. Tech companies have already rushed into global credit markets, raising hundreds of billions of dollars to fund AI projects, taking advantage of corporate credit spreads near their lowest levels this century to secure low-cost financing.

Meanwhile, the historical highs of the US stock market continue to attract equity financing from companies. SpaceX's $86 billion IPO is a typical microcosm of strong demand for AI-related assets. Major investors have already warned that if AI investment returns disappoint, this wave of debt issuance will severely test the market's risk tolerance.

The BIS stated clearly in the report: "Disappointment over returns could trigger a sudden tightening of financing, turning the capital expenditure boom into a protracted investment bust, with potential knock-on effects on financial conditions."

Historical lessons: Real technological breakthroughs can also fuel bubbles

The BIS cites several historical precedents as references for the current AI boom. The report lists the canal mania of the 1830s, the British railway mania of the 1840s, and the internet bubble of the late 1990s, arguing that these historical events provide "instructive parallels."

These events share a common feature: they all stemmed from genuine technological breakthroughs but ultimately attracted more capital than commercial returns could support. The BIS notes that "these episodes ended with investment reversals that triggered economy-wide downturns."

The BIS does not entirely dismiss AI's development potential. The report acknowledges that AI has so far provided an important boost to global growth and could "significantly" increase productivity over the next decade, bringing substantial efficiency gains to businesses. However, the historical gap between real technological potential and excessive capital enthusiasm is the core logic behind the BIS's current warning.

Household equity exposure expanded, stock market adjustments have broader impact

The BIS believes that compared to historical tech bubbles, if the current AI boom triggers a major stock market correction, the impact will be broader. The reason is that households now hold a significantly higher proportion of stocks relative to their wealth and income than in the past, so a sharp market downturn would more directly impact household balance sheets and consumer spending.

Financial stability is also under threat. The BIS warns that the liabilities accumulated by AI companies through massive debt financing will amplify systemic risk pressures when the market turns.

Multiple pressures叠加, global economy faces compound shocks

Beyond AI risks, the BIS describes the threats to the global economy as a convergence of multiple pressures. The US-Iran war has led to the near-closure of the Strait of Hormuz trade route, through which about one-fifth of the world's oil and liquefied natural gas was transported before the war. The BIS warns that the economic consequences of ongoing energy disruptions "have not yet fully materialized."

The report points out that the dangers to the global economy have already risen, with pressure points concentrated in four areas: persistent inflation risks, doubts about the sustainability of AI-related investments, accumulating financial vulnerabilities, and worsening fiscal conditions across countries. These four pressures intertwine and overlap, constituting what the BIS sees as the main downside threats to the global economy.

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