The International Monetary Fund says an AI share price crash could threaten global financial stability in its twice yearly Global Financial Stability Report. The IMF named sky high valuations for AI firms and rising debt as key vulnerabilities, warning that an AI correction could have global consequences and that exposure to US AI assets is now the highest the fund has seen. Athanasios Vamvakidis, deputy director of the IMF’s monetary and capital department, said the exposure of the rest of the world to US assets, particularly AI, is the highest it has ever been. The report lists an AI crash as one of three salient near term risks alongside rising government borrowing costs and the threat of a major cyber-attack. The IMF flagged concentrated holdings in the so called magnificent seven, naming Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla, which now account for more than 35 percent of the S&P 500, up from 12 percent a decade ago, and whose market capitalisation rose more than 50 percent in the past two years. The fund highlighted growing leverage from company borrowings, hedge fund exposure, retail margin borrowing, circular financing arrangements, and large investments by hyperscalers including Amazon Web Services, Google, Meta and Oracle, saying a reassessment could sharply reduce investment, trigger equity market corrections, tighten financial conditions and produce global spillovers.
