RBI warns AI stock boom risks sharp correction and systemic stress

RBI is effectively saying out loud what a lot of macro analysts have been hinting at: the AI trade is starting to look bubbly, with narrow leadership and stretched valuations concentrated in a small set of chip and platform companies. Its Financial Stability Report explicitly ties AI-linked equity exuberance, leverage, and circular financing structures to a higher probability of outsized drawdowns, especially if expectations about AI’s long-term payoff start to wobble. ([bfsi.economictimes.indiatimes.com](https://bfsi.economictimes.indiatimes.com/articles/rbi-warns-of-market-risk-amid-ai-valuation-surge/126291427))

For the race to AGI, that matters because a deep correction in AI-exposed assets would hit the cost of capital for large training runs, data centers, and risky frontier experiments. RBI also underscores that Asian markets—from Hong Kong to Korea and Taiwan—are now tightly coupled to U.S. AI plays, which raises the risk that a U.S.-centric AI bust cascades into global funding and infrastructure plans. In an optimistic scenario, this kind of warning nudges boards and investors toward more disciplined, diversified AI strategies rather than pure GPU speculation. In a pessimistic one, regulators and banks pull back hard after a shock, slowing the aggressive scaling regimes that many see as central to AGI timelines.