BIS Warns AI Selloff Could Spill Into Credit Markets

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https://www.bis.org/publ/arpdf/ar2026e1.htm

US imports of AI-enabling products from Asia have surged, while China’s share collapsed and supply shifted toward ASEAN, Taiwan, and Korea.

That supports the BIS point that the AI boom is tied to a huge hardware supply chain, so any shock to chips, power, trade routes, or financing can spread beyond tech stocks.

Rohan Paul@rohanpaul_ai

BIS is warning that an AI-driven market selloff could quickly spill into credit, because stock losses and credit spreads have moved together in past stress episodes like 2008 and 2020.

Private credit has also become a bigger lender to smaller firms, and software borrowers are increasingly tied to multiple lenders, so an AI shock could spread through a less transparent credit system.

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Rohan Paul@rohanpaul_ai

BIS is warning that an AI-driven market selloff could quickly spill into credit, because stock losses and credit spreads have moved together in past stress episodes like 2008 and 2020.

Private credit has also become a bigger lender to smaller firms, and software borrowers are increasingly tied to multiple lenders, so an AI shock could spread through a less transparent credit system.

Rohan Paul@rohanpaul_ai

Central bankers now fear the AI gold rush could seed the next major financial shock.

Bank for International Settlements (BIS) just issued one of its sharpest warnings yet about debt building behind the AI boom.

The danger is not AI itself; the danger is building a leveraged supply chain around revenue that has not yet proved durable.

The risk is that if AI demand disappoints, data-center spending could slow, borrowers could struggle to repay, and stress could spread from tech into credit markets.

AI demand pushed hyperscalers to spend heavily on chips, data centers, and power capacity, and that spending supported growth, trade, and easy financial conditions while equity investors priced in years of high earnings growth.

Debt changed the shape of the boom because hyperscaler bond issuance topped $100B in 2025, while off-balance sheet vehicles shifted data-center obligations toward private credit funds, insurers, and other non-bank lenders.

Circular financing adds another weak point because chipmakers, hyperscalers, AI labs, and compute providers can fund each other while also booking future sales from each other, which can make real demand harder to read.

A capex slowdown could hit suppliers first, then credit markets, then households, because US stocks make up about 64% of the MSCI Global index and household equity exposure is higher than in past cycles.

Private credit raises the systemic risk because direct lenders have quadrupled AI and IT exposure in 5 years to about 15% of portfolios, while some retail-facing funds already face redemption pressure.

AI can still deliver real productivity gains, but the financing stack now assumes that delivery arrives fast enough to support huge fixed costs.

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Rohan Paul@rohanpaul_ai

AI-exposed sectors are already getting more output from fewer workers, with productivity up above 2% by Q3-25 while employment is down roughly 1%.

Bank for International Settlements (BIS)’s warning is that AI can raise efficiency and still create financial risk if the spending boom assumes growth while the labor market side starts weakening demand.

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Rohan Paul@rohanpaul_ai

BIS says a large share of AI financing is circular: chipmakers and hyperscalers invest in AI labs or compute providers, which then commit to buying chips or compute from those same backers.

The danger is that private, poorly disclosed deals can make AI demand look stronger than it really is, while hiding who actually carries the loss if revenue falls short.