Slashdot has reported:

The International Monetary Fund has identified weaker artificial intelligence investment and profitability as one risk that could trigger a correction in AI-related asset prices and contribute to global market turmoil. Rising leverage and concentrated exposures could make such a correction more severe, according to the IMF’s latest semiannual Global Financial Stability Report.

The report identifies three risks that could sharply tighten financial conditions: a less durable AI investment boom, renewed inflation or fiscal concerns that push up sovereign bond yields, and increasingly sophisticated cyber threats. Higher government bond yields could affect financial markets broadly. Cyber risks are growing as finance becomes more digital and interconnected.

Existing vulnerabilities could turn market stress into systemic events. The global banking system remains broadly resilient, but weaker banks persist in some areas. Liquidity mismatches have increased among insurers and pension funds, while private credit faces rising leverage and contingent liquidity risks.

Hedge funds can support markets in calm periods, but leverage and crowded trades could worsen stress and create spillovers to prime brokers. Some emerging markets have also seen policy buffers erode, while frontier economies are relying more on less transparent forms of financing.

Tokenized asset markets remain small and may bring efficiency gains in several areas, the report says. They can also open new channels for leverage and liquidity and maturity mismatches, while increasing technology and infrastructure risks.

The report calls for policies to strengthen financial resilience, improve transparency, contain excessive leverage and increase preparedness for future shocks. It also discusses the danger of continuing cyberattacks alongside the risk of an AI market correction. The full report is available as a PDF.