"The 'central bank of central banks' sounds the alarm on an AI bubble: Trillion-dollar capital spending frenzy may turn into a prolonged crash."

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The Bank for International Settlements (BIS) has warned that the AI investment boom dominated by tech giants could turn into a "prolonged investment collapse," shaking global financial markets and damaging the world economy. Known as the "central bank of central banks," BIS has directly pointed out the current over-exuberance of the AI market, making this a clear risk warning from one of the world's most authoritative financial institutions.

In its annual economic report released on Sunday, BIS noted that the combined capital expenditure of the world’s five largest “hyperscale” cloud computing firms is expected to exceed $1 trillion from 2025 to the end of 2026. If actual returns in the tech sector fall short of expectations, investors may quickly tighten financing, causing this capital expenditure boom to abruptly reverse into a "prolonged investment depression," setting off a chain reaction in global financial conditions.

According to the UK’s Financial Times, signs of instability have already appeared in the market. After SpaceX’s $86 billion IPO completion this month, it immediately launched a $25 billion bond issuance. The chief investment officer at Allianz warned this week that this move signals the market is entering a “bubble zone.” Since SpaceX’s listing, the stock market has remained volatile, and with rising expectations of a Federal Reserve interest rate hike, investor sentiment has become noticeably more cautious.

BIS also warns that the energy shock triggered by the US-Iran war and the near closure of the Hormuz Strait trade route has not fully dissipated, and the inflationary impact "has begun to emerge and may persist for a long time," which, together with the risk of the AI bubble, constitutes multiple threats facing the global economy.

Uncertain Returns Behind Trillion-Dollar Capital Expenditures

The core contradiction of the current AI boom lies in the gap between massive capital investment and uncertain commercial returns. Tech companies have surged into global credit markets, raising hundreds of billions of dollars to fund AI projects and taking advantage of corporate credit spreads near century lows to access cheap financing.

Meanwhile, historic highs in the US stock market continue to attract corporate equity financing. The $86 billion SpaceX IPO is a typical reflection of the strong demand for AI-related assets. Major investors have warned that if AI investment returns fail to materialize, the wave of debt issuance will severely test the market's risk tolerance.

BIS clearly stated in its report: “Disappointing returns may trigger a sudden tightening of financing, turning the capital expenditure boom into lasting investment depression, and potentially causing chain reactions to financial conditions.”

Historical Lessons: Real Technological Breakthroughs Can Also Spawn Bubbles

BIS referenced several historical precedents to draw analogies with the current AI boom. The report cited the canal mania of the 1830s, Britain’s railroad mania of the 1840s, and the late-1990s internet bubble, considering these events to be "instructive analogies."

The common feature among these events: all originated from genuine technological breakthroughs but ultimately attracted excess capital beyond what commercial returns could support. BIS pointed out, "All these events ended in investment reversals and triggered recessions that affected the entire economy."

BIS does not entirely deny the potential of AI’s development. The report acknowledges that AI has so far provided important impetus to global growth and could "significantly" boost productivity over the next decade, bringing substantial efficiency gains to enterprises. Nevertheless, the historic gap between real technological potential and excessive capital enthusiasm is the central logic behind BIS’s warning.

Expanded Household Stock Exposure, Broader Impact from Market Corrections

BIS believes that, compared to historical technology bubbles, a major market correction triggered by the current AI boom would have a wider impact. The reason is that the ratio of households holding stocks relative to their wealth and income levels is now significantly higher than in the past. If the market undergoes a sharp pullback, it will more directly impact residents’ balance sheets and consumer spending.

Financial stability faces similar threats. BIS warns that the massive debts accumulated by AI companies through large-scale bond financing could amplify systemic risk pressure if the market reverses.

Multiple Pressures, Compound Shocks Facing the Global Economy

Beyond AI risks, BIS describes the threats facing the global economy as an overlap of multiple pressures. The US-Iran war has led to the near closure of the Hormuz Strait trade route, through which about one-fifth of global oil and liquefied natural gas was transported prior to the conflict. BIS warns that the economic consequences from continuous energy disruption "have not fully materialized."

The report notes that the current danger to the global economy has risen, with pressure points concentrated in four areas: persistent inflation risks, uncertainty over the sustainability of AI-related investments, mounting financial vulnerabilities, and worsening fiscal conditions among countries. These four overlapping pressures constitute, in BIS’s view, the main downside threats to the global economy today.

Risk Disclaimer and Disclaimer ClauseThe market carries risks, and investment requires caution. This article does not constitute personal investment advice and does not take into account the specific investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, viewpoints, or conclusions in this article are suitable for their particular circumstances. Investing based on this article is at your own risk. ```