THE Bank of England on Wednesday warned of a growing risk of a ‘sudden correction’ in the world stock markets. The massive Artificial Intelligence (AI) bubble is on the verge of collapsing the world stock markets, as the share price of AI companies have reached stratospheric levels, completely disconnected from the actual profits these companies are producing.
The Bank of England’s Financial Policy Committee (FPC) warned: ‘On a number of measures, equity market valuations appear stretched, particularly for technology companies focused on artificial intelligence, before going on to say that this ‘leaves equity markets particularly exposed should expectations around the impact of AI become less optimistic.’
Although AI focused tech stocks are concentrated in US markets the FPC warned that the UK, along with every country in the world, was at risk from the AI bubble bursting and crashing the US stock market saying: ‘As an open economy with a global financial centre, the risk of spillovers to the UK financial system from such global shocks is material.’
The head of the International Monetary Fund, Kristalina Georgieva, echoed the Bank’s warnings while Jamie Dimon, the boss of JP Morgan (the US’s biggest bank) told the BBC that he was ‘far more worried than others’ about the risk of a crash which, he suggested, could happen within the next six months.
Warning about the consequences of the economic crash of the capitalist economy Dimon went on to say that governments were ‘taking their eye off the ball’ when it comes to security, adding: ‘People talk about stockpiling things like crypto, I always say we should be stockpiling bullets, guns and bombs.’
The only class talking about stockpiling crypto and other supposedly ‘safe’ havens for their money are the capitalist financiers and bankers.
It is these parasites who will be hiding behind armed guards on remote islands when the working class erupts in revolution against being made to pay the cost of recession and economic collapse.
Behind these fears, is the fact that the massive rise in the stocks listed on Wall Street has been driven not by any increase in US industries but almost entirely driven by frenzied investment in the so-called Magnificent Seven tech companies – Google, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla. These seven account for about 37% of the stock valuation on Wall Street.
Since the AI investment frenzy emerged three years ago, shares in Nvidia, which makes computer chips, increased by 1,350%!
The key promise of the AI companies to justify their huge share prices, encourage investors to jump on board and the massive outlay in infrastructure required for AI, was that if companies bought their products they could improve productivity and slash jobs at the same time.
This promise was dealt a terminal blow in August when the Massachusetts Institute of Technology published research showing that 95% of organisations that invested in generative AI were getting zero returns from this investment.
American capitalism has been banking on AI sustaining the soaring stock market, while the US economy is drowning under massive national debt and crippled by inflation.
In the UK, the Starmer government has also been claiming that the future salvation of British capitalism is in the hands of AI and US tech giants whose value is based on promises of profits some time in the future.
As boom turns overnight into bust, the capitalist class is determined that while it shelters in its mansions and island paradises the working class will pay the price for capitalism’s collapse.
The powerful working class will never allow itself to be driven back to the days of the Great Depression of the 1930s. While the Bank of England, IMF and economists have issued warnings about a catastrophic crash, the trade union leadership have not uttered a word of warning to workers or made any preparations for the crash.
The only resolution to this crisis, is for the working class to force its trade union leaders to stop ignoring the unfolding catastrophe and to organise the strength of the working class in a general strike to bring down the Starmer government and bring in a workers government and a socialist planned economy. Smashing capitalism with socialist revolutions is the only way forward!