IMF warns AI share and bond market correction could destabilize global finance

The International Monetary Fund warns in its Global Financial Stability Report that a correction in AI stock prices could spread globally and put financial stability at risk.

It cites sky-high AI valuations, rising debt, and circular financing, including $300bn of transactions between hyperscalers and "weaker AI firms" over three years, supplemented by $650bn in debt, in exchange for $1.4tn in future financial commitments. The IMF names an AI crash as one of three salient risks, alongside rising government borrowing costs and a major cyber-attack.

In the same report, the IMF warns that government bond yields could rise in a disorderly way as inflation, public debt and AI-related borrowing pressure sovereign bond markets. It says hyperscalers' share of global investment-grade bond issuance has risen to 10% from less than 1% since 2024. The IMF says AI-linked issuance does not appear to be the dominant driver of yields, but it has grown large enough to compete with government bonds for investor capital. It also flags leveraged hedge fund Treasury trades as susceptible to a disorderly unwind.