Bank of England Warns AI Debt Risks Could Spill Over to Crypto Markets

Derived from Coinotag, the Bank of England has raised concerns that the global AI spending boom, projected to reach $5 trillion over five years, is driven by heavy debt and inflated valuations, which could pose financial risks and spill over into broader markets, including cryptocurrencies. The central bank highlighted that half of future AI infrastructure spending will come from external borrowing, with rising credit stress and widening credit default swap spreads signaling potential defaults. AI has driven two-thirds of S&P 500 gains in 2025, amplifying bubble concerns. A sharp decline in AI-related stocks could damage household wealth, increase borrowing costs, and indirectly pressure crypto markets. The report draws parallels to the dotcom bubble but notes that current AI firms generate real cash flows. Nvidia, with a $4.37 trillion market cap, is a key focal point, with its ecosystem and partnerships amplifying contagion risks.