AI BOOM CROSSES $1 TRILLION INVESTMENT MARK AS BIS WARNS OF NEW FINANCIAL RISKS

The global artificial intelligence boom has entered a scale large enough to influence the wider financial system, with the Bank for International Settlements warning that the extraordinary pace of AI investment could create new risks for markets, companies and central banks even as the technology promises a major increase in productivity. According to BIS chief Pablo Hernández de Cos, the world’s five largest technology companies are expected to invest more than $1 trillion in artificial intelligence during 2025 and 2026, while broader industry forecasts indicate that worldwide AI investment could rise from roughly $500 billion currently to as much as $4 trillion by 2030. The numbers underline how quickly AI has moved from being primarily a software and research story into a massive infrastructure economy involving computing power, semiconductor equipment, data centres, electricity, cloud infrastructure and specialised technology. The warning from the BIS is significant because the concern is not that AI investment is necessarily a bubble, but that the speed and financing structure of the current expansion could create vulnerabilities if expected commercial returns fail to materialise at the pace investors anticipate. Unlike earlier software cycles, the current AI race requires enormous upfront spending, with technology companies committing billions of dollars to chips, servers, data centres and energy infrastructure before the economic benefits of those investments are fully realised. The BIS has also pointed to growing use of debt and private credit to finance AI-related expansion, making the financial structure of the boom more complicated and potentially less transparent. If valuations remain high while earnings growth fails to justify expectations, investors could face sharp repricing across technology markets, with consequences extending into banks, private-credit markets and institutional portfolios. At the same time, the BIS acknowledges that the productivity potential of AI is genuine. Generative AI is already demonstrating substantial gains in areas such as coding, consulting and professional writing, although the challenge is translating productivity improvements at the individual-task level into sustained economy-wide economic growth. The development has particular relevance for India because the country possesses several of the ingredients required to participate in the next stage of the AI economy, including a large technology workforce, digital public infrastructure, expanding data-centre capacity and a growing startup ecosystem. The BIS has specifically identified India as having a genuine opportunity to narrow the technology gap with advanced economies if investment in skills, infrastructure and adoption continues. However, the transition will not be without disruption. AI is increasingly capable of automating routine cognitive work, creating pressure on employment in areas such as customer service, programming and administrative functions. That means the next phase of India’s technology growth will depend not only on building AI companies but also on retraining workers and creating new categories of employment around AI deployment, data management, cybersecurity, robotics and digital infrastructure. For Indian startups, the investment environment could therefore change significantly. Venture capital that once concentrated heavily on SaaS and relatively asset-light software businesses is increasingly moving toward companies capable of building deeper technology moats. The same shift is visible globally as investors look beyond traditional enterprise software toward semiconductors, robotics, energy systems, advanced manufacturing and other deep-tech areas. The AI boom is consequently becoming a broader industrial transformation rather than simply another technology cycle. For businesses, investors and policymakers, the key question now is whether the enormous capital being deployed will generate productivity and profits large enough to justify the valuations and infrastructure spending. If the answer is yes, AI could become one of the most important drivers of global economic growth over the coming decade. If returns disappoint, however, the scale of investment means the correction could extend well beyond technology stocks. That is why the BIS warning is being closely watched: AI may be one of the world’s biggest economic opportunities, but its extraordinary capital requirements and increasingly complex financing model also make it one of the most important emerging financial risks.