The Bank for International Settlements (BIS) warns that the current global push into artificial intelligence (AI) finance could create instability if returns disappoint. In its annual economic report, the BIS says funding for AI is increasingly moving through non-bank financial channels, including hedge funds and private credit, where oversight and liquidity dynamics can differ from traditional banking. The BIS frames these developments as “pressure points” alongside other stresses such as inflation and fiscal pressures. It cautions that an “AI bust” could quickly unwind investment positions, with funding strains and price swings spreading into credit markets. The BIS likens the potential scale of disruption to the 2008 financial crisis, arguing that a downturn could turn into a sharper and faster event than a conventional banking crisis. The report also highlights the risk of a sudden pullback in capital if investors reassess expected returns, which could amplify losses and market stress across interconnected parts of the credit system.