Bank of England warns AI‑driven stock boom is stretching valuations and raising systemic risks

Summary

In its half‑yearly Financial Stability Report, the Bank of England said risks to the UK financial system have risen this year, citing stretched equity valuations for companies linked to artificial intelligence, rapid growth in private credit, and large leveraged bets in the gilt repo market. The central bank estimates enthusiasm for AI has pushed US stock valuations to their most extended levels since the dot‑com bubble and UK levels to their highest since the global financial crisis, warning that a sharp correction could transmit losses through credit markets even though core UK banks remain well capitalised.