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IMF Warns AI Bubble Burst Could Reduce Global Economic Output by 0.4 Percent by 2028
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CNBC TV18•14-10-2026, 15:20
IMF Warns AI Bubble Burst Could Reduce Global Economic Output by 0.4 Percent by 2028
- •The International Monetary Fund cautioned that the artificial intelligence boom is increasingly fueled by borrowed money, risking a 0.4 percent drop in global economic output by 2028 if a sharp reversal occurs.
- •Large technology companies now account for 10 percent of global investment-grade bond issuance, rising significantly from 1 percent in 2024.
- •Hedge funds equity positions and margin loans have climbed to 15 percent of the GDP of advanced economies, while individual stocks now comprise 28 percent of leveraged ETFs.
- •Circular investments involving large AI firms funding smaller companies that buy back their products have generated billions in debt and equity linked to future revenue commitments.
- •The IMF urged regulators to tighten oversight on stock-market borrowing, enforce stronger capital requirements, and limit concentrated exposure to the high-risk AI sector.
Key Questions Answered
According to the IMF's Global Financial Stability Report, a sharp reversal in the artificial intelligence boom could reduce global economic output by 0.4% by 2028.
The IMF urged regulators to tighten oversight of borrowing used for stock and leveraged ETF investments, and recommended implementing stronger capital requirements alongside limits on concentrated exposure to the AI sector.
Large technology companies, known as hyperscalers, now account for 10% of global investment-grade bond issuance, representing a significant increase from just 1% in 2024.
