BOOM AND BURST

Financial experts warn of a looming Al bubble. Consumer and money editor KATIE ELLIOTT reveals how a feared market-wide 'correction' can hit us all... and how to prepare yourself

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WITH AI stocks skyrocketing to dizzying heights, caution bells are ringing across the financial world and beyond.

The Bank of England has already flagged an AI “bubble” that could burst like the dotcom crash — sending shockwaves through the British economy.

Now, Microsoft founder Bill Gates has issued the same warning for global markets. “There are a ton of these investments that will be dead ends,” he told US broadcaster CNBC this week.

The so-called bubble refers to surging and unrealistic valuations of artificial intelligence companies, inflated by investor hype and speculation rather than sustainable profits.

When a bubble occurs, it can set the stage for a sharp market ‘correction’, experts warn - ie a sharp fall in all kinds of shares, with grave consequences far from the City and Wall St.

Companies like OpenAI are currently valued at around $500billion (£372billion) - up from $157billion a year ago. One firm, Anthropic, has nearly tripled to $170billion since March.

However, the Bank of England's financial policy committee says AI-driven tech valuations look “stretched” - leaving markets vulnerable if optimism fades. It cautions that a “sudden correction” could “adversely affect the cost and availability of finance” for households and businesses.