BIS Chief Warns Disappointing AI Returns Could Turn Investment Boom “Into a Bust”
Pablo Hernández de Cos, General Manager of the Bank for International Settlements (BIS), warned that disappointing AI returns could transform the current investment surge into a downturn. Speaking at the Global Fintech Fest 2026 in Mumbai, he cited rising debt and opaque financing as key risks to financial stability. The five largest technology companies are projected to spend over US$1 trillion on AI in 2025 and 2026, with global AI investment expected to grow from US$500 billion today to between US$3 trillion and US$4 trillion by 2030. Much of this spending is increasingly funded by private credit, as capital expenditures begin to outpace cash flows at major firms. Hernández de Cos also highlighted concerns about complex financial ties between chipmakers, cloud providers, and AI companies, along with new cybersecurity challenges for financial institutions.
The BIS chief's warning about a potential AI investment bust, delivered in Mumbai at the Global Fintech Fest 2026, carries particular weight for India and other Asian markets heavily investing in AI infrastructure. With global AI investment projected to hit US$3 trillion to US$4 trillion by 2030, the shift towards private credit funding for major tech companies' AI spending introduces new vulnerabilities. This opaque financing, including circular arrangements where suppliers take stakes in AI firms that then commit to buying their services, could mask true financial health and inflate valuations. For Asian startups and tech giants, this suggests a need for greater transparency and robust due diligence in AI-related investments. The increasing financial interconnectedness between chipmakers, cloud providers, and AI companies, coupled with intense competition, raises the risk of overinvestment relative to future returns. A market correction could impact household spending across Asia, given the global interconnectedness of equity markets. Furthermore, the cybersecurity risks amplified by AI pose a significant challenge for financial institutions in markets like Singapore and Hong Kong, which are major financial hubs. Central banks in the region will also find it harder to assess financial conditions as AI simultaneously influences economic activity, inflation, and interest rates.
