Over the past year, artificial intelligence trade has become one of the key pillars of global risk appetite.
However, the Bank for International Settlements (BIS) is now warning that a similar consumption boom could cause fiscal stress if expected returns do not materialize.
The Basel-based organization, which advises central banks, said in its annual economic report that five hyperscalers plan to spend more than $1 trillion in AI-related capital spending from 2025 to 2026.
BIS said the scale of the investment raises questions about whether companies are committing too much capital before the business case is fully proven.
According to BIS:
“Disappointing earnings could cause a sudden setback in financing, turning a capital investment boom into a prolonged investment recession, with knock-on effects on financial conditions.”
For Bitcoin traders, this warning extends beyond Silicon Valley’s chip and data center competition.
A sharp reversal in AI spending could tighten liquidity across stocks and credit, putting cryptocurrencies to a difficult challenge. In other words, will Bitcoin be the first to trade as another risk asset during a downturn, or will long-term financial discourse begin to regain momentum after the shock?
AI spending boom draws central bank scrutiny
The BIS, which acts as a forum for central banks, warned in its annual economic report that monopolistic competition in artificial intelligence could be pushing investment beyond what future profits can support.
BIS states:
“If supply bottlenecks constrain production, the current surge in capital spending could prove unsustainable. Intense competition for market leadership could further fuel overinvestment and increase the risk of a sharp reversal if AI outcomes fail to meet expectations, as we have seen in previous waves of innovation.”
The concern is not that AI lacks economic potential. BIS said the technology could ultimately improve productivity in ways separate from earlier waves of automation and software development. If AI systems can improve their own performance and help generate new ideas, the long-term macroeconomic impact could be significant.
However, the short-term financial risks are different. Companies like Google, OpenAI, and Anthropic are spending huge amounts of money before it is clear how much revenue that spending will generate, how long that revenue will last, and how quickly the infrastructure supporting AI will age.
Indeed, the biggest technology companies have poured money into chips, cloud capacity, data centers, power supplies, and networking equipment as they compete for users and market share.
The scale of this competition is helping to strengthen investor confidence in technology stocks and drive demand across suppliers and infrastructure companies related to building AI.
But BIS warned that intense competition could create vulnerabilities for itself. If all major companies spend heavily to avoid delays, the sector could end up with overcapacity, lower revenues, and financing structures that become difficult to maintain as optimism fades.
That dynamic has appeared before. BIS pointed to an earlier investment boom related to canals, railways, electrification and the internet.
Each technology later changed the economy, but it also created a period in which investors raised too much money in too short a time, ultimately leading to a painful reversal.
Considering this, the BIC concluded that:
“The scale and pace of the current AI investment boom, with expectations of large productivity returns, is similar to these precedents and highlights potential downside risks in the near term.”
Severe physical bottlenecks further exacerbate the problem. The voracious appetite for computing power is straining the supply of advanced semiconductors, grid equipment, and raw power.
This surge in demand is already pushing up electricity prices and threatens to impact broader inflation indicators at a time when geopolitical conflicts in the Middle East are putting their own strains on global supply chains, according to BIS.
Credit risk increases as stock prices rise
Meanwhile, the BIS’s concerns extend far beyond a simple stock market correction to how an AI shock could impact the broader financial system.
While the early stages of AI development were primarily funded by the vast cash reserves of Silicon Valley leaders, today’s multi-trillion dollar investments require increased reliance on debt and increasingly opaque funding structures.
BIS noted that AI infrastructure now extends to corporate bond markets, private credit, lease financing, data center construction, energy contracts, and supplier contracts.
Chipmakers, cloud providers, AI labs, and data center operators are increasingly connected through equity stakes, purchase agreements, and long-term capacity deals.
In fact, Onramp Bitcoin, a BTC-focused financial services company, recently pointed out that:
“A web of overlapping commitments ties building AI into a nearly $1 trillion loop. Nvidia invests in AI labs like OpenAI, the labs rent cloud capacity from Oracle and CoreWeave, and the cloud buys Nvidia chips. The same $1 can be accounted for as investment, financing, revenue, and sales all at once, making headline demand numbers mean nothing at all.”
BIS warned that such arrangements could obscure risks, noting that the claims net was built based on expected future demand. That structure is likely to strengthen as AI adoption continues to accelerate.
However, if demand falls short of expectations, the stress can come back cascading.
As a result, suppliers may lose orders and data center developers may struggle to fill capacity.
At the same time, private credit funds may face pressure on loans related to software, infrastructure, or technology borrowers. And banks may find that their exposure to private credit and non-bank finance is more complex than the headline numbers suggest.
That’s why BIS’s warning doesn’t just apply to technology stocks. A decline in AI stocks will directly hurt investors. A widespread reassessment of AI financing could result in tighter credit conditions for companies that rely on the same financing environment.
Credit spreads have remained relatively narrow, reflecting investors’ confidence that borrowers can continue to service their debts.
Conditions can change rapidly if the pricing of equity risk changes rapidly. As lenders demand more risk coverage, weaker borrowers face higher refinancing costs, reduced access to capital, and pressure to reduce investment.
This is the route through which AI disappointment can become a macro event.
Bitcoin’s initial reaction may be defensive
Bitcoin’s role in this type of economic shock will be complicated, as it is often presented by proponents as a hedge against currency depreciation, fiscal stress, and financial system fragility. Its supply is fixed, there is no corporate issuer, and it is not dependent on corporate earnings or debt repayment schedules.
Such capabilities may become more attractive if the AI credibility crisis ultimately forces policymakers to ease financial conditions. However, in the early stages of a widespread decline, Bitcoin is likely to face similar pressures as other risk assets.
When liquidity is tight, investors are often the first to sell liquid positions. Bitcoin is continuously traded, can be sold quickly, and is held by many investors who also own stocks, exchange-traded products, derivatives, and other high-beta assets. Therefore, it becomes vulnerable when the portfolio is de-risked.
Recent market trends support that concern. crypto slate It recently reported that Bitcoin has fallen below $63,000 after South Korea’s benchmark KOSPI stock index fell nearly 10% last week.
This decline showed that liquidity conditions, leverage, and risk appetite may dominate the scarcity narrative for an extended period of time.
AI-driven market shocks may follow a similar sequence. Technology stocks tied to the ramp-up are likely to fall first. Credit spreads could widen as investors revalue debt associated with data centers, suppliers and private financial institutions. Funds facing losses or margin pressures may reduce their overall positions in crypto assets and other liquid assets.
At that stage, Bitcoin does not need to be directly connected to the AI infrastructure to be affected. They just need to be part of the same risk budget.
Liquidity issues come next
But the second step depends on the government’s response to the ensuing market carnage.
If the AI investment reversal remains within a small group of technology companies, the damage may be limited. Stocks will be repriced, suppliers will adjust, and investors will reassess valuations without forcing major changes in monetary policy.
But the risk, the BIS warns, is that the consumption boom is large enough to affect the entire financial system.
This suggests that a significant pullback in AI capital spending could simultaneously hit business investment, employment, household assets, and credit availability. Those pressures could become even more severe if inflation remains high and central banks feel unable to cut interest rates quickly.
This makes setting risk assets difficult. If inflation rises, policy may be tightened even if investment is weak. Tight credit could expose private market leverage. A decline in stock prices could reduce household assets and slow consumption. Each channel can enhance the other channels.
The policy path is extremely important for Bitcoin. This asset often performs best when liquidity expands, real interest rates fall, and investors expect central banks to support markets. A credit shock that eventually brings easier money could revive that trade.
Arthur Hayes, co-founder of BitMEX, argued that the AI bust could help propel Bitcoin prices significantly higher if authorities respond by creating new liquidity and investors move away from debt-ridden financial structures.
While this view remains speculative, it captures why some crypto traders are looking to AI capital investment and credit markets as potential drivers of the next Bitcoin cycle.
However, the timing has not been determined. Therefore, traders betting on the eventual liquidity response may have to endure drawdowns that occur before then.
(Tag translation) Bitcoin
