Addressing the sustainability of this investment wave, Bailey was asked whether he believed the current enthusiasm around AI resembled a speculative bubble that could eventually burst. "You could see some correction of asset prices at some point," the Governor replied, acknowledging the inherent volatility that accompanies rapid technological shifts. While Bailey expressed optimism about the long-term benefits of the technology, noting that AI has "great potential to strengthen growth in our economies"—an outcome he described as highly necessary for the United Kingdom—he insisted that policymakers must remain vigilant. "But it also brings with it substantial risks and so we have to be on top of both of those," he stated.
A key concern for the Bank of England is the risk that the immense financial bets currently being placed on AI may not yield the expected payouts. Bailey pointed out that current market dynamics are characterized by an assumption that nearly every major participant will emerge victorious. "There is a large, very large, amount of investment going into this sector now, and of course that’s natural because it’s a major area of growth," Bailey observed. "And of course you see that the asset prices of the companies that are developing it have gone up a lot and that reflects the fact that there are high expectations of what it can deliver."
However, the Governor cautioned against the belief that all current market leaders will sustain their dominance. "Everybody is currently priced to be a winner," Bailey remarked, before adding a sober reminder of financial history: "you look back at the past, not everybody is a winner." To illustrate his point, Bailey drew a parallel to the early days of the consumer internet in the 1990s. "Google was not the first market leader in internet search. It was Netscape. Nobody can remember Netscape today. It doesn’t exist. So not everybody always wins."
