"Not Everybody Always Wins": Bank of England Governor Warns AI Boom Could Trigger Market Shocks

The governor of the Bank of England has issued one of the most direct warnings yet from a sitting central banker that the artificial intelligence investment boom could produce painful shocks in financial markets — and that the United Kingdom needs to be prepared for them.

Speaking exclusively to the BBC in an interview published October 1, Andrew Bailey said the central bank is watching the enormous amounts of money being invested in AI “very carefully,” and cautioned with a piece of market history: “not everybody always wins.”

The warning

Bailey’s core concern is straightforward. The money spent on — and loaned to — AI firms over the last few years in the hope of large returns has driven markets to value some of those companies as multi-trillion dollar businesses. Asked directly whether he believed an AI bubble could burst, the governor did not dodge: “You could see some correction of asset prices at some point.”

He was quick to balance the message, saying the technology has “great potential to strengthen growth in our economies” — something Britain desperately needs. “But it also brings with it substantial risks and so we have to be on top of both of those,” he said.

“Everybody is currently priced to be a winner”

The most quotable line of the interview cuts to the heart of the valuation debate. “Everybody is currently priced to be a winner,” Bailey observed — before delivering a history lesson from the dot-com era:

“You look back at the past, not everybody is a winner. Google was not the first market leader in internet search. It was Netscape. Nobody can remember Netscape today. It doesn’t exist. So not everybody always wins.”

The Netscape comparison is telling. The browser pioneer was the poster child of the 1990s internet boom, captured the public imagination, and ultimately vanished — while the real wealth accrued to successors like Google. Bailey’s implication is clear: today’s AI market leaders may not be tomorrow’s, and asset prices may not reflect that distinction.

The scale of the bet he is describing is enormous. AI chipmaker Nvidia is currently the world’s most valuable listed company at roughly $5.5 trillion, thanks largely to investors banking on the profits AI might create. Alphabet, Meta, Microsoft, and Amazon are spending hundreds of billions of dollars on the technology. And Anthropic and OpenAI — two of the largest AI companies in the world — are preparing to sell shares on the US stock market in IPOs that many expect to pull hundreds of billions of dollars more into the industry.

“There is a large, very large, amount of investment going into this sector now, and of course that’s natural because it’s a major area of growth,” Bailey said. “And of course you see that the asset prices of the companies that are developing it have gone up a lot and that reflects the fact that there are high expectations of what it can deliver.”

His bottom line: “We are prepared for the fact that there will be, I think, some shocks come along to markets and we have to deal with that. We have to make sure the system is resilient.”

Cyber attacks and untraceable deepfakes

Financial stability is not only about valuations. Bailey pointed to AI’s use in offensive cyber operations, saying the technology has created “a much more powerful way of uncovering vulnerabilities” in software that has existed quietly for years.

“It’s revealing things that have been in bits of operating software that we’ve had, and all of us have had,” he said. “In the wrong hands… it’s a very powerful, potentially very powerful, weapon.”

Then there are deepfakes. Bailey spoke from first-hand experience: in June, fabricated images depicting him and Nigel Farage in a physical fight circulated on X, and he revealed that the Bank has struggled to trace their origin.

“We’ve got to be able to trace these things back. And we need a lot of help from the tech sector to do that,” he said — a pointed demand for provenance and watermarking tools from the platforms themselves.

The upside: a faster MPC

Bailey was not only sounding alarms. He highlighted a big potential benefit sitting inside the Bank itself: AI’s ability to speed up the analytical work that supports the Monetary Policy Committee, the body that sets UK interest rates.

“It’s not taking a decision, but it’s a tool in the hands of the policy maker and that’s good,” he said — a carefully drawn line between augmentation and automation at the heart of one of the world’s oldest central banks.

A warning landing on tense markets

The interview’s timing is hard to miss. Government borrowing costs in the UK, US, France, and Japan have hit their highest levels in decades, straining public finances. The yield on 30-year UK bonds rose above 6% this week, its highest since 1998, while the US 10-year yield reached 5.34%, its highest since 2002 — a signal of a broader sell-off in government debt.

Analysts pointed to no single trigger, but the backdrop matters: central banks have been raising rates to fight inflation driven by soaring energy prices, and as rates rise, bonds lose their shine relative to other opportunities. Investors have been piling into AI as firms pump money into software development and data centers — the very flows Bailey has spent months warning about.

Escalating rhetoric, months in the making

The BBC interview is the loudest note yet in a steady drumbeat from Bailey this autumn. As chair of the Financial Stability Board, he wrote to G20 finance ministers in August that frontier AI’s impact on cyber risk was now the financial system’s most immediate concern, alongside stretched AI-fuelled valuations and leverage. A day earlier he told Reuters the Bank saw a growing risk that dangers from AI-linked debt would materialise, stressing the need for “rigorous model testing, conducted both before and after deployment.”

And in remarks to the Guardian, he went further than most policymakers have dared, arguing for a “right to intervene” in AI systems amid a growing threat landscape — warning that failures could threaten daily card payments, bank transactions, and trading across stock and bond markets.

Why it matters

Central bankers choose their words with actuarial precision, and a governor of the Bank of England telling the public to expect “shocks” is not routine. The message lands at a moment when the AI industry’s financing structure — a web of equity, debt, vendor lending, and circular deals — is drawing scrutiny from regulators and credit analysts alike. Goldman Sachs recently tallied over $500 billion of AI-linked debt in the system.

Bailey’s framing also matters for what it is not: he is not calling the boom a bubble destined to burst, nor is he demanding the investment stop. He is preparing the plumbing for the correction history suggests is coming — “some shocks,” not necessarily a collapse — while insisting the Bank itself intends to harness the technology.

For investors, the takeaway is the Netscape lesson: in every technological revolution, the market’s early pricing assumes every contender wins. It never has. For everyone else, the governor’s message is that the institution charged with guarding the UK’s financial stability now treats AI as both the engine of future growth and one of the sharpest risks on its horizon — and it is building accordingly.

The Bank of England, founded in 1694, has outlived the South Sea Bubble, the railway manias, and the dot-com crash. Andrew Bailey’s warning is a reminder that it intends to outlive this one too.