IMF’s Georgieva warns AI bubble losses could go global

International Monetary Fund Managing Director Kristalina Georgieva has warned that the rush of money into artificial intelligence could end in a market correction that spreads across borders. She said investors' profit expectations may be getting ahead of what the technology can actually deliver. In an essay released Oct. 15, during the IMF-World Bank Annual Meetings in Bangkok, she wrote that "in a severe scenario, we could see a market correction that cascades through the highly leveraged and circular AI ecosystem," and that "given the sizable cross-border holdings of AI assets, the losses could spread around the world," according to the text republished by Eurasia Review.marketwatch.com

Georgieva expects AI spending to exceed what was historically invested in railroads, electricity grids and the internet. She said it could add about half a percentage point to annual global growth over the next decade, but the productivity gains will take time to show up, MarketWatch reported.morningstar.com

Debt-fueled, circular dealmaking

Georgieva's main concern is how the boom is being paid for. Hyperscalers' share of investment-grade bond issuance has risen more than tenfold in two years, from under 1% to 10%. The industry is also concentrated and its deals are often circular: big tech firms invest in frontier-model labs, which then buy computing capacity from those same firms, she wrote. Large earnings misses by AI developers could undermine profit expectations and hit share prices, according to MarketWatch. Amazon Amazon.com, Inc. ↗ 0.27%, Alphabet ↗ 0.37% and Meta ↘ 0.11% have each set capital spending plans in the hundreds of billions of dollars, TODOAlicante noted.todoalicante.es+2

The warning repeats themes from earlier in the week. The IMF's Global Financial Stability Report warned against "complacency" about a pullback in AI investment. A separate downside scenario found that a steep drop in AI investment could cut global GDP by 1.1% by 2028, GDN Online reported. "We now have an economy that is standing on one leg, the AI leg," Georgieva said in Bangkok.gdnonline.com

Cyber threats and jobs

Georgieva also pointed to cyber risks. "A major attack affecting payments, trading, or access to deposits could cause immediate losses and undermine confidence," she said, MarketWatch reported. At an Oct. 14 briefing she said "AI‑enabled cyber-attacks are already in reality," according to an IMF transcript. She urged regulators to use capital and concentration requirements and to strengthen cyber defenses, TODOAlicante reported.imf.org+2

On jobs, IMF research finds about 40% of jobs worldwide are exposed to AI, rising to about 60% in advanced economies. Georgieva said it is still too early to tell how many will be lost, her essay noted. Earlier in the week she called AI a "slow-moving tsunami" for the labor market and said young graduates are most exposed, CNBC reported.cnbc.com+1

She also warned about the strain on public finances. "AI may raise growth, but it could also reduce labor income, increase inequality, and erode the tax base," Georgieva said. "With debt already high, policymakers will need to make hard choices."