Pablo Hernández de Cos, head of the Bank for International Settlements (BIS), warned that investments flowing into artificial intelligence (AI) have reached a scale that directly affects global economic conditions, while increasingly opaque financing structures are generating new risks to financial stability.
Speaking at a conference hosted by an Indian central bank, Hernández de Cos said the AI boom is influencing demand, supply and financial markets simultaneously, making it harder for central banks to interpret economic developments even if the technology does not by itself change monetary policy mandates.
Scale and structure of financing
The BIS estimates that the five largest technology firms will direct more than $1 trillion to AI development in the mid-2020s, and industry forecasts project global AI investment could reach as much as $4 trillion by 2030. The BIS chief emphasized that financing for the AI boom is increasingly relying on credit and private market sources rather than corporate earnings.
That shift deserves attention because a large portion of that financing is opaque and interconnected, which raises systemic risk—particularly if corporate results fall short of lofty expectations.
Productivity and labour market effects
Hernández de Cos cited studies showing that generative AI can raise productivity by 10–65 percent on specific tasks, notably in programming, consulting and professional writing. Broader economic effects are currently smaller: prevailing estimates suggest AI could raise overall productivity growth by roughly 0.5 percentage points per year, depending on the pace of adoption and how efficiently labour and capital are reallocated.
Advanced economies are likely to benefit from larger services sectors, while countries such as India—thanks to digital public-service infrastructure—may have scope to catch up. On the labour market, actual layoffs have so far been limited, but signs of displacement are emerging in customer service, programming and administrative roles, underscoring the importance of reskilling programs.
Risks and historical parallels
The BIS head warned about the combination of high market valuations, increased concentration, and opaque financing. If corporate performance disappoints, these factors could create substantial vulnerabilities. Hernández de Cos referenced lessons from the railway investment era and the dotcom bubble to argue that the current scale and speed of investment warrant caution.
Why this matters
The BIS warning matters because rapid technological investment and the financing channels that support it can affect the resilience of the financial system. Without sufficient transparency and safeguards, interconnected financing and elevated market expectations could produce system-wide disruptions.
(Source: Reuters)
