- Singapore’s central bank warns sharp AI investment drop could hurt global growth and finance
- Robust AI investments support economic resilience amid geopolitical and trade challenges
- Prolonged AI funding on weak models may increase risks in equity, credit, and loan markets
Singapore's central bank has warned that any sharp decline in global investment in artificial intelligence could undermine economic growth and increase risks to financial stability, as the global economy becomes increasingly reliant on continued spending in the sector.
The Monetary Authority of Singapore said robust investments in data centres, semiconductor production and computing infrastructure have played a key role in supporting global economic resilience despite ongoing geopolitical tensions and trade-related challenges, according to a report by Bloomberg.
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However, MAS Managing Director Chia Der Jiun warned that a substantial pullback in AI-related spending could dampen global growth and expose vulnerabilities in financial markets. He noted that prolonged funding of AI projects based on weak business models, deteriorating cash flows and complex financing structures could heighten risks across equity, credit and loan markets.
At the same time, if the AI investment cycle continues for an extended period, it could reshape income patterns, demand dynamics and inflation trends globally. Bloomberg reported that Chia highlighted the growing dependence of the US capital markets and semiconductor-exporting Asian economies on expectations of sustained investment in AI infrastructure.
He also pointed to rising energy and chip costs, raw material supply constraints, regulatory uncertainty, intense competition among AI model developers and challenges in monetising AI investments as key risks facing the sector.
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The warning comes amid increasing scrutiny from global policymakers over the sustainability of the AI investment boom.
The Bank of England has previously cautioned that a correction in AI-related stocks could spill over into the broader economy, while the Bank for International Settlements has warned that heavy debt-funded AI investments could eventually trigger a boom-and-bust cycle.
Chia said financial markets are increasingly looking for stronger commercial revenue growth to justify continued AI financing.
While current credit risks remain broadly contained, Chia said greater transparency is essential, warning that financial stability risks could increase if significant capital continues to flow into opaque and weakly structured investment vehicles in the years ahead, Bloomberg reported.
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