Bank for International Settlements warns AI boom risks global recession and middle-class job losses
Consensus Summary
The Bank for International Settlements (BIS) issued a stark warning that the current AI-driven economic boom, fueled by unprecedented investment in infrastructure, risks triggering a global recession akin to past speculative bubbles like the dotcom crash. Five major US tech firmsâMicrosoft, Meta, and Amazonâare set to spend $1.45 trillion on AI infrastructure in the next year, while Australiaâs tech boom, particularly in Victoria and NSW, is surpassing the scale of the mid-2010s mining boom. The BIS cautioned that while AI may boost productivity, it could also intensify labor displacement, as businesses increasingly replace workers with automation. Unlike previous technological revolutions, AI directly competes with human cognitive abilities, limiting workers' ability to adapt. The report also noted signs of economic strain, including a 5% drop in tech shares, rising prices for chips and semiconductors, and potential inflationary pressures that could force central banks to maintain high interest rates. The BIS emphasized that if AI investments fail to deliver returns, a sharp pullback in financing could exacerbate financial vulnerabilities, risking a prolonged downturn.
â Verified by 2+ sources
Key details reported by multiple sources:
- The Bank for International Settlements (BIS) warned in its annual report that the AI boom could trigger an international recession, comparing it to historical 'manias' like the canal-building surge of the 1830s, electrification exuberance of the 1920s, and the dotcom boom of the late 1990s, all of which ended in economic downturns.
- Five US companiesâMicrosoft, Meta, and Amazonâare forecast to spend $US1 trillion ($1.45 trillion) over the next 12 months on AI-related infrastructure.
- Australiaâs spending on data centres and AI-related infrastructure is surging, hitting record levels in Victoria and NSW, with the tech boom on track to surpass the mid-2010s mining boom in size and scope.
- US businesses with higher AI adoption have shown stronger productivity but lower job growth compared to sectors not using AI.
- Apple announced price rises of almost 20% across its computers and tablets due to strong demand for computer chips, while Xbox said it would significantly lift gaming console prices due to input shortages tied to AI data centre construction.
- Shares in tech companies have fallen by up to 5% over the past week due to concerns over long-term profitability and AI-induced inflation.
- The BIS highlighted that AI competes directly with human cognitive abilities, potentially narrowing workers' ability to move up the value chain or find new non-disrupted tasks, unlike past general-purpose technologies.
- The BIS warned that if AI investments fail to deliver expected returns, it could trigger a sudden pullback in financing, turning the AI capex boom into a protracted investment bust with knock-on financial effects.
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The Bank of International Settlements has predicted major economic damage from the boom in artificial intelligence, and itâs been correct before.