Bank of England: AI valuations have pushed the valuation multiples of some U.S. stock indices to levels seen at the peak of the internet bubble

The Bank of England published an article titled "All in Chips! Will the Collapse of AI-Related Asset Valuations Trigger Financial Stability Consequences?"

The article states that the share of "artificial intelligence (AI) stocks" in the market capitalization of U.S. stock indices is increasing.

The valuation multiples of these companies often imply high expectations for future profit growth.

These two facts have pushed the valuation multiples of some U.S. stock indices to levels seen at the peak of the internet bubble.

While artificial intelligence may have transformative economic impacts, which could justify these valuations, various factors make this outcome uncertain.

Additionally, the physical infrastructure needed to support AI model training and inference is expected to require trillions of dollars in investment over the next five years, a significant portion of which will be funded by debt.

The article discusses the potential impact of declining asset prices influenced by artificial intelligence on financial stability, as well as how these impacts may grow in the future