The International Monetary Fund (IMF) said that a sharp downturn in artificial intelligence investment could threaten global economic growth, as rising government debt and cyber risks also leave the world economy vulnerable to further shocks.
In its latest World Economic Outlook, released during the IMF and World Bank annual meetings in Bangkok, Thailand, on Oct. 13, the fund forecast global growth of 3.1 percent in 2026 and 3.4 percent in 2027.
In one downside scenario, the IMF said that a steep drop in AI investment could lead to a sharp fall in asset prices, ultimately cutting global GDP by 1.1 percent by 2028, including a 1.8 percent drop in U.S. output.
In its separate analysis published on Oct. 12, the IMF warned policymakers against complacency over rising financial risks amid a potential pullback in AI investment and valuations.
The IMF said that hyperscalers, as the largest data center operators, are “borrowing more and more, while investors have been leveraging to invest in AI stocks.”
It said that circular financing arrangements in the AI sector, involving equity and debt flows between AI firms, suggest that stress at key companies receiving investment could lower revenue forecasts and investment valuations, which in turn would weaken the value of the accumulated debt in those deals.
The IMF’s review of 14 such transactions found that since 2023, there have been about $300 billion in equity investments and $650 billion in debt, in exchange for $1.4 trillion in future revenue commitments.
“We now have an economy that is standing on one leg, the AI leg,” IMF managing director Kristalina Georgieva told a Bretton Woods Committee event.
“What if it wobbles? What if there is disappointment and that leads to potentially a more difficult environment?”
“If there are questions about the monetization of AI, the equity investments will deplete in value, the debt may be difficult to service, and the revenue commitments in the future may not materialize,” Jason Wu, assistant director of the IMF’s Global Markets Analysis Division, told a press conference at the Bangkok meetings.
An ensuing AI market correction would feed back through the real economy, dragging down broader asset prices and overall demand through a wealth effect reduction, said Athanasios Vamvakidis, deputy director of the IMF’s Monetary and Capital Markets Department.
The correction would also lead to reduced trade, IMF chief economist Silvana Tenreyro said.
Tenreyro said trade in AI goods grew 29 percent between 2023 and 2025, more than triple global trade’s 8.3 percent growth over the same period. Without the AI trade, overall trade growth would have been only 4.6 percent.
In its analysis, the IMF also warned that increasingly interconnected financial systems were becoming more exposed to cyberattacks and that rising sovereign bond yields were threats to financial stability.
It said that sovereign bond yields have risen amid renewed inflation pressures from higher energy prices, fiscal concerns, and, in some cases, stronger-than-expected economic growth.
It may be the case that bond yields are moving back toward the levels seen before the global financial crisis, when growth and inflation were higher than in the 2010s.
“The market is concerned about absorption potential of the huge issuance that is coming from the sovereigns and increasingly also from the private sector, at the time that central banks are shrinking their balances, and we have to rely more on price-sensitive investors,” Vamvakidis said.
The IMF said that a major disruption could affect payments, trading, access to deposits, or other critical financial services. The danger is particularly acute if an attack affects a major financial institution, payment system, cloud provider, or software platform, allowing disruption to spread through an increasingly interconnected financial system.
It said that in more than 70 percent of reported cases so far this year, software providers had almost no time to patch vulnerabilities before attackers exploited them. That’s more than double the share in 2021.
“Frontier AI models could accelerate both attacks and defenses, increasing the importance of cyber resilience, incident reporting, crisis preparedness, and oversight of critical third-party providers,” it said.
Reuters contributed to this report.
Friends Read Free
Copy
Facebook
Tweet
