The Bank of England’s Financial Policy Committee warns that rapid advances in artificial intelligence are increasing potential financial stability risks. In its assessment, the committee highlights that investor valuations are becoming more stretched, which can raise vulnerabilities if market sentiment shifts or if expectations about AI-driven growth do not materialise as anticipated. The committee’s concern is framed around the possibility of an “AI bubble,” where higher valuations may not be supported by underlying fundamentals. The warning is part of the Bank of England’s broader monitoring of risks that could affect the financial system, including how changing market valuations can transmit stress to other sectors and institutions. While the reports focus on valuation pressures and the risk of a bubble, they do not indicate that the committee has identified any specific fault in individual firms. Overall, the message is that the speed of AI-related developments and the investment appetite around them are factors the Bank is treating as relevant to financial stability.