IMF warns of an AI bubble

The International Monetary Fund has warned that the world economy is overly dependent on the boost from artificial intelligence investment, and that an abrupt halt to that spending would drag global GDP down by 1.1% through 2028. The institution keeps its growth forecast at 3.1% for 2026, but does so assuming the Strait of Hormuz reopens before March.

The IMF's Managing Director, **Kristalina Georgieva**, summed it up with an image anyone can understand: "We now have an economy that is standing on one leg, the AI leg." The remark, made at a Bretton Woods Committee event, is no rhetorical flourish. It is the central conclusion of the latest World Economic Outlook, presented in **Bangkok** during the IMF and World Bank annual meetings.

The Fund estimates that the global economy will grow **3.1% in 2026**, a tenth of a point more than it forecast in July, and **3.4% in 2027**. The reason for the upward revision is that investment in AI infrastructure remains strong and, for now, offsets the rise in oil prices caused by the war in the Middle East. In other words, what is driving the economy is not household consumption or traditional industry, but the money being buried in data centers, chips and language models.

## A scenario that hinges on the Strait of Hormuz

The IMF's forecasts for 2027 are not a firm prediction but a conditional bet. The institution assumes the Strait of Hormuz reopens before March and that shipping conditions return to their pre-war state by October 2027. If that does not happen and the conflict drags on, the picture changes.

The Fund itself puts numbers on the adverse scenario: if the war is prolonged and oil stays above **$130** during the first quarter of 2027, growth the trinc year is cut by half a percentage point. It is not a catastrophe, but it is the difference between growing and nearly stalling in several economies.

Here lies the first catch. The forecasts that make headlines carry a condition almost nobody reads: that geopolitics behaves. And lately, geopolitics is not behaving.

## The day AI stops being profitable

The second catch is closer to home and directly affects the pocketbook of anyone with a pension plan indexed to the S&P 500. The IMF warns in its Global Financial Stability Report that a collapse in AI investment could trigger a sharp fall in asset prices. In the harshest scenario, global GDP would shrink by **1.1% through 2028**, with a **1.8%** drop in US output.

**Jason Wu**, deputy director of the IMF's Global Markets Analysis Division, explained the mechanism at a press conference: if doubts arise about AI monetization, equity investments lose value, debt becomes hard to service and future revenue commitments fail to materialize. In other words, the problem is not that AI is a fad, but that current valuations assume that fad turns into real profits soon.

**Athanasios Vamvakidis**, deputy director of the Monetary and Capital Markets Department, added that such a correction would spill into the real economy through the wealth effect: less portfolio value, less spending, less demand. And the IMF's chief economist, **Silvana Tenreyro**, added the trade kicker: trade in AI-related goods grew **29% between 2023 and 2025**, more than triple the **8.3%** of global trade over the same period. Without that trade, growth in world trade would have been just **4.6%**.

## Public debt is also squeezing

The other front the IMF flagged in Bangkok is public debt. High levels of borrowing and rising bond yields, which could climb further due to war-driven inflation, eat into interest payments in budgets and curb growth.

Georgieva warned against complacency among "systemically important" advanced economies that are "negligent about their fiscal position." The IMF praised the United Kingdom as the only major advanced economy to have put clear plans in writing to reduce public debt in the coming years, though it asked it not to stray from course just weeks before the new British government presents its budget.

**Taiwo Oyedele**, Nigeria's Finance Minister and chair of the Group of 24 developing countries, noted that the debt vulnerabilities of many emerging economies are a "major barrier" to inclusive growth. By his estimates, developing countries pay **$500 billion** more for their debt than developed ones, while grappling with growing deficits.

**Josh Lipsky**, senior vice president for international economics at the Atlantic Council, put it bluntly: France, Germany and the United States need fiscal consolidation, but are heading in the opposite direction. "I antiestéticar it will take some kind of crisis to wake up and realize this is what needs to be done."

The IMF also mentioned cybersecurity risks associated with AI. Banking regulators are stepping up their efforts: according to Reuters, top US supervisors are questioning banks about their use of advanced AI models, while European regulators are pressing them to strengthen their recovery plans.

Even the worst-case scenario of falling AI investment would not push the world into recession, according to **Petya Koeva Brooks**, the IMF's deputy director of research, who confirmed this in an interview with Reuters. Still, the institution insists that governments start taking unpopular measures to control their budgets. Nobody seems to be listening. This is not investment advice: if you have money in the stock market, talk to a professional before moving anything.