According to the October 2026 Global Financial Stability Report released by the International Monetary Fund (IMF), the expansion of artificial intelligence (AI) has become a major driver of economic growth and equity market performance, but weaker AI investments or lower profitability could trigger a broader financial market correction. Massive spending on semiconductors, data centers, and infrastructure has supported global economic activity and helped ease forward price-to-earnings ratios across several equity markets following strong earnings growth among core AI firms.
Growing evidence indicates that AI capabilities can be delivered at lower investment thresholds or that potential gains may fall short of expectations. IMF scenarios suggest that an unwinding of AI investments could reduce global gross domestic product by up to 0.4 percent, global investment by 1.3 percent, and global consumption by 0.6 percent by 2028.
The report emphasizes that accumulated leverage across the AI ecosystem heightens the vulnerability to potential market shocks. Hyperscalers have increased their share of global investment-grade corporate bond issuance from less than 1 percent to 10 percent since 2024 to support high capital expenditures as free cash flows decline. Meanwhile, non-hyperscaler operators face higher debt burdens and lower profitability.
The report also identifies circular financing structures as a reinforcing mechanism for leverage-driven risk. Fourteen publicly disclosed deals since 2023 feature hyperscalers providing approximately $300 billion (around €268 billion) in equity and $650 billion [approx. €581 billion) in debt to financially weaker AI firms in exchange for $1.4 trillion (approx. €1.25 trillion) in future revenue commitments. Financial distress at key investees poses a significant “wrong-way risk” to the sector, as equity and debt investments could depreciate precisely when expected revenue streams fail to materialize.
While advanced Asian equity markets exhibit the highest sensitivity to global AI stock returns, the consequences of a downturn could spread globally. Even in regions with lower equity market sensitivity, such as the euro area, the United Kingdom, and emerging markets, financial spillovers remain possible due to substantial growth in cross-border holdings of U.S. equities between 2022 and 2026.
