China Warns of AI Market Overheating Risks

China has warned about the risks of overheating in the AI market amid a rapid increase in investments, reports Reuters. Xiao Yuanqi stated that global investments in AI are overly concentrated: the influx of capital into tech and leading companies increases debt burden and may accelerate business expansion. The concentration of investments raises borrowing costs and financial pressure for companies outside the tech sector, limiting their ability to reinvest and expand production, and increasing credit risks. Xiao called for the preparation of mechanisms to manage macroeconomic and financial risks associated with AI.

Market Dependence

According to Danske Bank, six American hyperscalers – Amazon, Microsoft, Alphabet, Oracle, Meta, and SpaceX – could allocate around $1.2 trillion for AI infrastructure in 2027; in 2026, their expenditures are estimated at approximately $900 billion. Tech and AI companies account for more than 40% of the S&P 500 and a significant portion of its growth over five years, but in October, the Nasdaq 100 lost over $2 trillion in market capitalization. According to the Institute of International Finance, global debt has exceeded $350 trillion – almost three times the global GDP.

Wall Street Positions

Blackstone President Jon Gray believes that demand for computing power already exceeds supply. Goldman Sachs CEO David Solomon noted that strong companies will attract funding, although investors will make mistakes. JPMorgan Vice Chairman Daniel Pinto believes that the market is pricing in excessive growth rates for AI companies. Citadel Securities CEO Peng Zhao pointed out that it is difficult to assess future revenue from AI. According to LSEG, capital raising by tech companies in the Asia-Pacific region grew more than threefold in the first nine months of 2026, to $125.8 billion from $36 billion a year earlier.

Warnings

The Bank for International Settlements warned that a correction in the AI market could impact the global economy: an increasing portion of investments is financed by loans rather than profits. Ray Dalio of Bridgewater compared the enthusiasm around AI to the bubbles of 1929 and 2000. Ken Griffin of Citadel stated that the AI market is "almost certainly" in a bubble. Previously, the SEC increased scrutiny over the reporting of AI companies.