The governor of the Bank of England has issued a warning about the current AI boom, saying it could set off financial market shocks, and has urged the UK to prepare for such events.
Andrew Bailey spoke to the BBC exclusively about the risks and benefits of AI for the UK economy. He said the technology has “great potential to strengthen growth in our economies,” but warned that “it also brings with it substantial risks and so we have to be on top of both of those.”
The Governor’s Watchful Eye
Bailey said the central bank is watching the huge amounts of money being invested in AI “very carefully.” He cautioned that “not everybody always wins.”
Over the past few years, investors have poured money into and lent funds to AI firms in search of substantial profits, driving market valuations for some of these companies into the multi-trillion dollar range. When asked whether he thought an AI bubble could collapse, Bailey responded with “You could see some correction of asset prices at some point.” That correction could occur at any point, according to his assessment.
The speaker cited Nvidia, the AI chipmaker whose stock now makes it the world’s most valuable listed company, with a market value of $5.5tn (£4.14tn). The figure stems mostly from investors who see AI as a path to substantial gains.
Four tech giants — Alphabet, Meta, Microsoft, and Amazon — are pouring hundreds of billions of dollars into the technology. Two of the biggest AI companies on earth, Anthropic and OpenAI, are getting ready to sell shares in their firms on the US stock market. Many expect this move to draw 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,” said Bailey. “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.”
“Everybody is currently priced to be a winner,” he added, but warned that “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.”
“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.”
The Cyber Attack Risk
Other dangers from artificial intelligence were also noted by Bailey, among them the use of the technology for assaults upon computer systems.
He said AI has created a “much more powerful way of uncovering vulnerabilities.” “It’s revealing things that have been in bits of operating software that we’ve had, and all of us have had.”
“In the wrong hands… it’s a very powerful, potentially very powerful, weapon,” he added.
Deepfakes and the Fake Fight
AI-generated images and videos of individuals that appear authentic represent a threat because they can be employed to deceive audiences.
Bailey knows this from personal experience. In June, deepfake pictures showing him and Nigel Farage fighting were pushed across social media platform X. Speaking to the BBC, he said the fakes were created in a manner that made it hard for the Bank to trace where they originated.
“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.
The Interest Rate Benefit
The MPC sets interest rates, and Bailey pointed to a major advantage of AI: it can accelerate the work that backs up the committee’s operations.
“It’s not taking a decision, but it’s a tool in the hands of the policy maker and that’s good,” he said.
What the Governor Has Said
The warning from Bailey carries restraint. He keeps a close watch on the investments, laying out the dangers plainly so the nation stands prepared for whatever follows.
The market correction he anticipates could arrive at any point.
The UK’s financial system needs to be ready for that shift.
Key Facts Box
- Nvidia’s market valuation: $5.5tn (£4.14tn)
- Anthropic and OpenAI preparing to sell shares on the US stock market
- Tech giants Alphabet, Meta, Microsoft, and Amazon spending hundreds of billions on AI
- Deepfake images of Bailey and Farage promoted on social media platform X in June
- Bailey: “You could see some correction of asset prices at some point”
The warning arrives while the corporations mentioned — Nvidia, Alphabet, Meta, Microsoft, Amazon, Anthropic, and OpenAI — sit among the most powerful on Earth. Together, their combined spending rises to hundreds of billions of dollars.
Bailey and Farage were featured in deepfake images that surfaced in June, while Anthropic and OpenAI continue their preparations to sell shares. Both situations are current events, not theoretical possibilities.
Instead of reacting with fear, Bailey is getting ready. He is keeping a close eye on the investments and laying out the risks plainly, so the UK will be prepared for whatever happens next.
The market correction he anticipates could arrive at any point.
The UK’s financial system needs to be ready for that shift.
Source material: “AI boom could trigger market shocks, Bank of England boss warns,” the BBC.
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