Why the IMF says AI investment boom could potentially be risky
The International Monetary Fund (IMF) has issued a cautionary note on the global surge in artificial intelligence (AI) investment, warning that while the technology is fueling productivity and growth, particularly in the United States, it may also cause a financial bubble similar to the late 1990s dot-com boom.
Speaking at a press briefing on the IMF’s latest World Economic Outlook, Pierre-Olivier Gourinchas, the Fund’s Chief Economist and Director of Research, described the AI investment wave as both transformative and risky.
“We are seeing very robust investment in that sector, both from companies developing AI models and from firms adopting them,” Gourinchas said. “This is being adopted very broadly, and it’s contributing to growth performance in the U.S. right now. But valuations are quite stretched,” he said.
The IMF notes that the rapid expansion of AI is helping to sustain economic activity, especially in advanced economies. Tech giants and traditional firms alike are pouring billions into machine learning, automation, and AI-driven analytics.
“People see their portfolios performing well,” Gourinchas said, adding, “That confidence is feeding back into stronger spending, which in turn adds to demand pressures.”
Despite the optimism, the IMF warns that asset prices tied to AI may be rising faster than the real economy can justify. Gourinchas said that while some of the projected profits behind today’s market valuations might be accurate, “no one can know for sure.”
The Fund fears that if expectations fail to materialise, if AI productivity gains prove slower or narrower than hoped, a market correction could follow, wiping out wealth and tightening financial conditions globally.
This story is written and edited by the Global South World team, you can contact us here.
