OECD Warns of Potential AI-Driven Stock Market Bubble Threatening Financial Stability

The Organization for Economic Co-operation and Development (OECD) has issued a cautionary note regarding the U.S. economy, highlighting the potential formation of a stock market bubble fueled by surging investments in artificial intelligence (AI). This development poses significant risks to financial stability and future economic growth.

In its latest Economic Outlook, the OECD projects a slowdown in U.S. economic growth from 2% in 2025 to 1.7% in 2026, with a modest rebound to 1.9% in 2027. While acknowledging the long-term benefits of AI advancements, the report emphasizes that the current rapid escalation in AI-related equity valuations could precipitate a market correction, adversely impacting the broader economy.

The OECD's report underscores that global growth is holding up better than expected, partly due to an AI investment boom offsetting some shocks from U.S. tariff hikes. However, it warns that renewed trade tensions or unmet investor expectations around AI could trigger a market correction.

Echoing the OECD's sentiments, the Bank of England has highlighted rising risks to the UK's financial system, driven largely by inflated valuations in the AI sector. The bank notes that investor enthusiasm for AI has pushed share valuations to unsustainable levels, raising fears of a market correction that could expose deeper financial vulnerabilities.

As of December 2, 2025, major U.S. stock indices have shown slight declines, reflecting market sensitivity to these warnings.

The OECD's report states, "Global growth is holding up better than expected as an artificial intelligence investment boom helps offset some of the shock from US tariff hikes."

Similarly, the Bank of England's Financial Stability Report notes, "On a number of measures, equity market valuations appear stretched, particularly for technology companies focused on artificial intelligence."

A potential AI-driven market correction could lead to substantial financial losses for investors, erode consumer confidence, and increase unemployment if AI-focused companies face financial difficulties. Policymakers are advised to monitor these developments closely, considering both the potential for AI to drive long-term economic growth and the risks associated with speculative investment behaviors.

The OECD's warning serves as a critical reminder of the delicate balance between fostering technological innovation and maintaining financial stability. As AI continues to reshape industries and economies, vigilant oversight and prudent investment strategies will be essential to mitigate the risks of an AI-driven stock market bubble.