The global financial system may be in the midst of an artificial intelligence bubble that echoes the dotcom boom and the 2008 housing crisis, according to John Schindler, secretary-general of the Financial Stability Board. In an interview, Schindler pointed to soaring asset valuations and concentrated investment in a handful of AI-linked companies as warning signs that the FSB is monitoring closely.
"One of the things that the financial system always faces is asset valuations and are they appropriate?" Schindler said from his office in Basel. "We know at the dotcom period that those asset valuations - very eager to catch the latest technology, the latest darling of the markets - led to some exuberance. We saw this in the housing price bubble before the great financial crisis. We might be seeing that now."
AI-related companies have added roughly $27 trillion in market value since November 2022, according to Goldman Sachs research. Chipmaker Nvidia became the world's first $5 trillion company last year. But stocks in chip companies have seen sharp losses in recent weeks, and questions are mounting over whether the technology can deliver the profitability and productivity growth that current valuations imply.
Concentration risk in a handful of companies
The FSB's concern is not just about high prices. The watchdog is tracking how financial bets are clustered in a small number of massive firms. A price correction in those companies could trigger a wider shock through hedge fund leverage and bank exposures. The Bank for International Settlements has warned that disappointing returns for AI hyperscalers could lead to a "protracted investment bust" and a sudden pullback in financing. The International Monetary Fund has also cautioned that markets could contract if AI fails to match expectations.
Andrew Bailey, chair of the FSB and governor of the Bank of England, has separately warned on multiple occasions about a potential price correction in AI stocks. The warnings come as SpaceX, the rocket maker and AI company founded by Elon Musk, set records for its June IPO before tumbling in price.
Schindler acknowledged the stretched valuations but stopped short of making a market call. "It does look like some of the valuations ... are quite up for the markets overall and for some of these companies. But I'm not a stock market prognosticator. I can't tell you how much further they'll go, whether they're justified or not. But it is something we monitor and discuss and work on trying to make sure that things don't go badly," he said.
Retail investors and hidden leverage
Policymakers in both the EU and the U.K. are encouraging citizens to invest in equity markets to boost economic growth and improve returns for savers. But with limited understanding of stocks and shares, individuals could take on risk they do not fully grasp. Schindler distinguished between ordinary retail investing and something more dangerous - debt-fueled speculation.
"If it's just mom and pop putting $100 in the stock market, that's one thing. If it is mom and pop leveraging that ten times over, that's something else, because the repercussions when something causes it to unwind are much more significant," he said.
The FSB is examining how much borrowed money firms are using to acquire AI assets. Schindler also pointed to the nonbank financial sector, which has grown substantially since 2008 and operates with lighter regulation than banks. "There could be build-ups of risk in parts of that sector that it's harder for us to assess. So, I can't say it will all be fine," he added.
Asked whether the finance industry has enough safeguards to remain stable if an AI bubble collapses, Schindler said: "I do hope so." Banks have proven resilient to shocks since the 2008 crisis, but he noted the financial system is "always evolving."
Why this matters for finance professionals
The FSB's warnings are not a sell signal, but they signal that regulators are scrutinizing AI-linked exposures across banks, hedge funds, and the shadow banking sector. For risk managers and portfolio analysts, the concentration of AI bets in a few mega-cap stocks means that a single sector correction could cascade through leveraged positions and counterparty exposures. The question is not whether AI will transform industries - it is whether current prices have borrowed too heavily from that future. Finance teams should be stress-testing their AI-related holdings against a sharp repricing scenario, particularly in firms with exposure to nonbank lenders or leveraged funds.
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