IMF Warns: Correction in the AI Market Could Hit the World

The International Monetary Fund warned in its Global Financial Stability Report that markets face a correction driven by developments in the artificial intelligence sector, identifying risks that could extend to the global economy, according to a report by The Register.

The report pointed to the phenomenon of "circular financing" among AI companies, where some firms rely on mutual investments and interconnected funding rounds that could inflate valuations and increase the sector's vulnerability.

It added that rising bond yields and cyberattacks represent two additional factors threatening financial stability, noting that more than 70% of vulnerabilities exploited in 2026 were exploited on or before the day of disclosure.

The IMF's warning comes after similar warnings from the Bank for International Settlements, reflecting growing concern among financial institutions over the consequences of the tight interconnection between financial markets and AI investments.

What do these terms mean?

Financial Stability Report: A periodic report issued by the International Monetary Fund to monitor risks threatening the stability of the global financial system.

Circular financing: Companies investing in one another or exchanging funding, which may artificially inflate valuations and increase risks during a downturn.

Bond yield: The return an investor achieves from holding a bond, and its rise increases borrowing costs and pressures high-risk assets.

Correction: A noticeable decline in financial asset prices after an excessive rise, usually measured by a drop between 10% and 20%.