The Bank of England says a burst in US AI stocks would spill into UK share prices, gilt yields, and corporate credit markets even though no major AI firms trade on domestic UK exchanges. The central bank points to AI stocks now making up roughly 44% of the S&P 500's market capitalization, up from about 26% at the end of 2022, and draws explicit parallels to the dot-com era.
The Bank of England is warning that a correction in US AI stocks would not stay contained within American borders. Governor Andrew Bailey has said that even though the UK doesn't host major AI firms on its domestic exchanges, the interconnected nature of global finance means Britain would absorb a significant hit.
AI stocks near 44% of the S&P 500
AI-related stocks account for roughly 44% of the S&P 500's total market capitalization, up from about 26% at the end of 2022. The BoE has been flagging this buildup since at least October 2025, when its Bank Overground blog drew explicit parallels to the dot-com bubble of the late 1990s.
Capital expenditures powering the AI buildout are projected to reach approximately $5.2 trillion by 2030. An estimated $800 billion of the roughly $1.5 trillion in external financing needed between 2025 and 2028 is expected to come from private credit. As a result, a slide in AI valuations would not stop at stockholders — lenders, including banks and private credit funds, would feel it too.
Why the UK would feel the shock
Gilt yields, the borrowing cost for the UK government, would also be affected, and corporate credit spreads in the UK would likely widen, making it more expensive for British companies to borrow. Bailey noted in July 2026 that a burst AI bubble could force the BoE to adjust monetary policy.
The BoE's July 2026 Financial Stability Report added another concern: cyber vulnerabilities tied to concentrated AI infrastructure. Because a handful of companies provide the computing backbone for the sector, a single point of failure — whether from a cyberattack or an operational breakdown — becomes a systemic risk.
Valuations echo the dot-com peak
The BoE flagged elevated cyclically adjusted price-earnings ratios, alongside forward price-to-earnings ratios for leading AI stocks that require sustained, aggressive earnings growth to justify current prices. Three risks stand out in the central bank's framework: AI adoption could slow as enterprises struggle to integrate the technology, the market hasn't settled on clear winners, and the scale of debt financing the buildout creates fragility if revenue growth disappoints.
For context, the Nasdaq lost nearly 78% of its value over two and a half years after the dot-com bubble burst in 2000. AI stocks' share of the S&P 500 already exceeds the peak concentration tech stocks reached during that era by some measures.
Source: Crypto Briefing
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