The rapid rise in artificial intelligence (AI) technology investment could pose financial-stability risks if companies fail to generate the returns investors expect, Pablo Hernandez, the head of the Bank for International Settlements (BIS) said on Thursday.

Hernandez's said the largest AI companies’ capital spending is increasingly outpacing their cash flows and being financed through debt and private credit, as part of an investment arms race between major firms. He drew an historical comparison to canal mania of the 1830s, the British railway mania of the 1840s, the electrification boom of the 1920s and the dotcom surge of the late 1990s, all of which were based on important technological breakthroughs.

"All drew in more capital than eventual returns could justify. In each of these cases, the eventual correction that followed had economy-wide implications," Hernandez said.

Chipmakers, hyperscalers and AI firms are all linked through financing arrangements that can be opaque and difficult to value, leaving the financial system exposed if expectations of future profits fall short, he added. A reversal in highly concentrated AI stocks could affect household spending, while the weight of U.S. equities in global markets could transmit a correction beyond the U.S.

Hernandez said five largest big tech companies alone plan to invest over a trillion dollars on AI-related projects between 2025 and 2026,. with expectations that global AI-related investment will grow from roughly $500 billion today to between $3 trillion and $4 trillion by 2030. Bridgewater Associates recently reported that Microsoft MSFT$490.41·Market Closed, Alphabet GOOG$328.41·Market Closed, Meta META$654.01·Market Closed and Amazon (AMZ), which have a combined market cap of approximately $12 trillion, expect to spend $650 billion together on AI infrastructure this year alone.

Concerns about an AI bubble have been circulating this year, such asCitrini Research's bearish 2028 scenario that unsettled technology stocks in February.

“With U.S. stocks accounting for a large share of global equity markets, the effects could propagate globally. In some jurisdictions, windfall gains from rising AI-related exports may also contribute to domestic asset bubbles, further exacerbating financial stability concerns,” he said.

“I do not say that this is where the AI boom must lead.But the scale and speed of the current investment boom, and the weight of expected commercial returns, do warrant some caution.”

The BIS chief said AI’s promise is real, including evidence of productivity gains in coding, consulting and professional writing,but added that the eventual economic effect will depend on how widely the benefits are shared and whether policymakers invest in skills, infrastructure and competition.