The AI investment boom, whose infrastructure spending is now large enough to influence the global economy, is creating new financial stability risks, warned Pablo Hernandez de Cos, general manager of the Bank for International Settlements (BIS), on Thursday 10 September 2026 in Mumbai.
🔑 Key takeaways
- The five largest global tech firms will invest more than USD 1 trillion in AI between 2025 and 2026.
- Global AI investment could climb from USD 500 billion to USD 4 trillion by 2030.
- The boom is increasingly funded by debt and private credit, often opaque and interconnected.
- Record sovereign debt and heavy hedge fund leverage create a new nexus with financial stability.
- The RBI describes the global economy as « reshaped » by geopolitical fragmentation and AI disruption.
An unprecedented AI capex cycle
The figures cited by the BIS general manager are striking. According to the Basel-based institution, the five largest global tech firms—all American or Chinese—are set to invest more than USD 1 trillion in AI between 2025 and 2026. Globally, sector projections point to a jump from USD 500 billion to USD 4 trillion by 2030.
This capital expenditure is no longer a sector footnote: it is reshaping global financial conditions and trade geography. Economies deeply tied to the tech supply chain—South Korea, Singapore, Malaysia and Taiwan—are benefiting from higher export prices for AI chips and equipment. Productivity gains, by contrast, remain unevenly distributed, depending on digital readiness and the size of the services sector.
| Indicator | Value | Horizon |
|---|---|---|
| AI capex, top 5 hyperscalers | >USD 1 trillion | 2025-2026 |
| Global AI investment | USD 500B → USD 4T | 2026 → 2030 |
| Productivity gain, targeted tasks | +10% to +65% | short term |
| Expected TFP increase | ~+0.5 ppt/year | annual |
« The promise of AI is real, but its long-term impact will depend on policy choices, on investment in skills and infrastructure, and on the distribution of the gains. »
Pablo Hernandez de Cos, General Manager of the BIS
Funding the boom: rising opacity
Hernandez de Cos stressed a point central to the BIS annual economic report published on 28 June 2026: the AI boom is no longer funded by corporate earnings but increasingly by debt and private credit. Much of this financing—private debt funds, special purpose vehicles, syndicated loans—remains, in his words, « opaque and interconnected ».
The BIS annual report identifies four key pressure points: rising inflation, uncertainty around the durability of the AI investment wave, financial vulnerabilities, and the new link between sovereign debt and financial stability. The message is unambiguous.
Productivity, jobs and new vulnerabilities
Studies cited by the BIS show generative AI can sharply raise productivity on specific tasks: +10% to +65% have been observed in coding, consulting and professional writing. The open question is the macro scaling-up. Current estimates assume total factor productivity (TFP) gains of about 0.5 percentage points per year.
Advanced economies—with larger services sectors and higher digital readiness—will capture most of the upside. Emerging markets face a more uneven outlook, although India has, according to Hernandez de Cos, a « genuine opportunity » thanks to its public digital infrastructure.
On jobs, layoffs remain limited but are already visible in customer service, programming and back-office functions, making reskilling and upskilling crucial to limit social friction.
Sovereign debt and hedge funds: a new nexus
The BIS chief warned of the combination of elevated valuations, heavy market concentration and opaque funding structures. If corporate earnings disappoint, these vulnerabilities could materialise. The parallel with nineteenth-century railway expansion or the dotcom bubble is explicit.
Frank Smets, interim director of the BIS Monetary and Economic Department, noted that this new sovereign debt–financial stability nexus could trigger more frequent and sharper drops in government bond prices, rapidly tightening global financial conditions.
« I am not saying this is where the AI boom has to lead, but the scale and speed of the current investment boom, and the weight of expected commercial returns, justify a measure of caution. »
Pablo Hernandez de Cos, General Manager of the BIS
BIS policy recommendations
The central bank for central banks calls on policymakers to prioritise price stability, ensure fiscal sustainability, coordinate and strengthen surveillance beyond the banking sector, and pursue structural reforms. The report also stresses the urgency of reducing debt levels in key economies, since a large share of that debt is held by non-bank financial intermediaries.
« Policymakers must act now. Any delay will only increase the cost of the necessary adjustments. »
Pablo Hernandez de Cos, General Manager of the BIS
Conclusion: a high-stakes cycle
The BIS diagnosis leaves little room for complacency: the AI boom is not a sector-side episode but an investment cycle whose scale is reshaping demand, supply and financial markets simultaneously. For central banks, the challenge is not to revisit their monetary mandate but to navigate an economy that is harder to read, in which anchoring inflation expectations remains the top priority.
In the near term, markets may stay buoyed by productivity expectations. Over the medium term, two scenarios compete: a broad, orderly diffusion with a measured derating of valuations, or a sharp correction triggered by downward earnings revisions and a private debt stress event. Public policy, more than ever, will be decisive.
Sources
- Reuters
- WMBD Radio / BIS annual report
- Euronext
- AOL
- Financial Stability Board (FSB), Nov. 2024
- Central Banking / RBI
This article is for informational and educational purposes only. It does not constitute investment advice. Do your own research (DYOR) before making any decision.
