“It does look like some of the valuations … are quite up for the markets overall and for some of these companies. But I’m not a stock market prognosticator. I can’t tell you how much further they’ll go, whether they’re justified or not. But it is something we monitor and discuss and work on trying to make sure that things don’t go badly,” Schindler said.
The “central bank for central banks,” the Bank for International Settlements, warned that disappointing returns for the AI hyperscalers could result in a “protracted investment bust” which could trigger a “sudden pullback in financing.” The International Monetary Fund also warned that markets could contract if AI doesn’t match expectations around its profitability and the productivity gains it can deliver.
The chair of the FSB, Schindler’s colleague Andrew Bailey, who is also the Bank of England governor, has cautioned on several occasions of a potential price correction in AI stocks.
But Schindler played down the wider risks, saying: “Our job is to think about all the things that can go wrong and think about ways to make those better. So this is just one of the things.”
Asked whether the finance industry has enough safeguards in place to remain stable if an AI bubble unravels, Schindler said: “I do hope so.”
Banks have “largely proven pretty resilient to shocks” since the 2008 crisis, but the financial system is “always evolving,” he said. Schindler also pointed to the nonbank sector, which is far bigger than it was in 2008 and less regulated than the banking industry.