The International Monetary Fund has cautioned that a slowdown in artificial intelligence investment could complicate central banks’ efforts to manage inflation, as new IMF scenarios project US economic output may fall 1.8% short of expectations by 2028 if current trends reverse.
Central Banks Face AI-Driven Risks
IMF Managing Director Kristalina Georgieva addressed policymakers in Washington on November 6, outlining how any weakness in AI-fueled growth would need to be closely watched when setting monetary policy. Her remarks followed a pronounced selloff in technology stocks that intensified questions about the sustainability of massive AI infrastructure investment.
Georgieva has previously described investment in artificial intelligence as a vital engine for economic expansion. However, she emphasized in an October IMF report that disappointing AI returns, high levels of leverage, and concentrated exposures among firms could transmit losses and instabilities throughout the financial system.
The IMF’s October World Economic Outlook featured a scenario in which an abrupt reversal in AI investment would result in declining asset prices, weaker business spending, and a slowdown in economic activity. Under this adverse scenario, global GDP could drop 1.1% below baseline projections by 2028, while US output is projected to be 1.8% below its expected level by that date.
Georgieva said that “policymakers will need to consider any diminishing momentum in AI-driven economic growth when making decisions about interest rates” as the investment environment evolves.
These projections are not predictions of outright recession, but rather estimate how much smaller economies could become compared to IMF baseline forecasts if the AI investment surge loses steam.
AI Investment and Inflationary Pressure
The risk is particularly pronounced for the United States, where spending on AI infrastructure has bolstered construction, fueled semiconductor demand, and contributed to economic growth. However, such large-scale investments place additional demands on electricity, construction materials, and computing resources, potentially adding to inflationary pressure.
The caution from the IMF comes on the heels of a Nasdaq decline on November 5, as renewed doubts about the profitability of AI companies prompted investors to reconsider the viability of continued infrastructure spending.
According to Georgieva, the surge in AI investment has allowed certain economies to counteract the adverse impact of Middle East oil-supply disruptions, but it also introduces new financial stability risks. Federal Reserve officials have echoed these concerns, warning that while AI spending may raise short-term costs, promised gains in productivity could still be some time away.
She noted that although the AI investment drive has helped offset external shocks, it is also “contributing to mounting financial stability concerns” due to the speed and scale of capital flows involved.
If AI investment begins to slow, the resulting dip in growth could prompt calls for lower interest rates. However, persistent inflation tied to energy and materials may keep central banks on a more restrictive path.
Why an AI Stock Crash Could Spread Beyond Technology
The IMF pointed out that risks associated with AI investment extend beyond the performance of semiconductor shares. Major technology players are increasingly dependent on complex financing structures that involve cloud service providers, chip manufacturers, and AI software developers.
In October, the IMF reported that hyperscale technology firms now account for approximately 10% of worldwide investment-grade bond issuance, up from less than 1% earlier in 2024. This rising exposure to debt markets means that disappointing AI-related revenues could impact not just equities but credit markets as well.
CoreWeave, a notable player in AI infrastructure, has witnessed higher costs for credit default protection, as investors react to the risks of heavily leveraged expansion. At the same time, significant redemptions from technology-focused funds reflect ongoing investor caution toward AI-driven assets, even as broader equity markets continue to attract capital.
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