The International Monetary Fund warned on Tuesday that a crash in the shares of AI companies could threaten the stability of the global financial system, the Guardian and Quartz reported.

The warning came in the IMF's twice-yearly Global Financial Stability Report. It said risks in the system remain "elevated." The fund named three "salient risks" that could set off market turmoil: a correction in AI-related stocks, a sharp rise in government bond yields and a major cyberattack.

"The consequences of an AI correction could be global," the IMF said in the report, Quartz reported. Advanced Asian stock markets would likely be hit hardest, while the euro area and the UK look more protected.

Athanasios Vamvakidis, a deputy director at the IMF, said the rest of the world's exposure to U.S. assets, especially AI, "is the highest it has ever been," the Guardian reported.

The IMF pointed to rising debt behind the AI boom. Big cloud and data center firms, known as hyperscalers, now make up 10% of global investment-grade bond sales, up from less than 1% in 2024, Quartz reported. Hedge funds and small investors are also borrowing more to bet on AI stocks.

The fund also flagged "circular financing." In these deals, big AI firms put money into weaker partners, which then promise to spend it back with them. The IMF counted about $300 billion in such equity deals, plus $650 billion in debt, tied to $1.4 trillion in future commitments, both outlets reported.

The IMF said there is "growing evidence" that AI may not need investment on the huge scale now under way, and that the gains may be smaller than expected. It urged regulators to limit borrowing used to buy AI stocks, including margin loans and leveraged exchange-traded funds.

What we know: The IMF named an AI stock correction as one of three top near-term threats to financial stability.
What we don't: Whether regulators will act on the IMF's call to curb borrowing tied to AI stocks.