The Zhitong Finance App learned that Bank of England Deputy Governor Sarah Briden said that stocks related to artificial intelligence (AI) have recently been sold off, which is currently not an urgent concern because market adjustments still seem to be in order. Briden said at a conference in London on Tuesday that the repricing of AI companies' equity and debt “is not necessarily something we should be concerned about.”
For several months, the Bank of England has warned that due to excessive market valuations, related asset prices need to be adjusted. Briden, who is in charge of financial stability affairs, said that if this adjustment can “return the market to a level that is probably more in line with economic growth prospects, profitability, and other relevant factors,” then this adjustment will be welcome.
Last week, after the Democratic Party won a big victory in the midterm elections, the market feared that the Democratic Party would tighten its AI regulatory policy after gaining an advantage in Congress and several states. Stricter AI regulations and restrictions on data center construction at the local level may slow down the US AI infrastructure investment process and have an impact on the capital expenditure and profit expectations of AI industry chain companies. This concern caused AI-related stocks to be sold off on a large scale, dragging down the US stock market to its biggest weekly decline since April 2025.
Breeden said that what the Bank of England is more concerned about is the risk that “price adjustments will trigger financial market behavior and thereby amplify the impact.” In other words, if falling asset prices trigger leveraged investors to close positions, financial institutions tighten financing, or transfer risk between different markets, then an otherwise orderly valuation correction could evolve into wider financial market turmoil.
Currently, the Bank of England is investigating the private market rather than specifically targeting the AI sector. Briden said that the transparency of the private market is relatively low, and the Bank of England is carrying out a “study aimed at understanding the current situation.” She added that 1 out of every 10 employees in the UK works for private equity-related companies, and 15% of corporate debt comes from the private market.
The Bank of England pointed out earlier that the private market has become an important source of financing for the real economy, yet it has complex relationships with traditional financial institutions such as banks and insurance companies. As the scale of private equity and private equity credit continues to expand, once the relevant markets experience tightening of financing conditions or downgrading asset valuations, risks may spread to the wider financial system through links between debt financing, portfolios, and financial institutions.
Notably, the Bank of England's focus on AI market risks did not begin with this sell-off. The central bank's Financial Policy Committee pointed out in the minutes of the meeting released in September that the issuance of AI-related debt is growing rapidly, and the capital market's risk exposure to the development of the AI industry is expanding accordingly. Some AI companies have high debt levels, and related financing arrangements sometimes have problems such as complex structures, insufficient transparency, and so-called “circular financing”. Once the market's expectations for AI growth are disappointed, it may increase investors' losses.
The Bank of England also pointed out at the time that AI and semiconductor stock valuations fell sharply in July. Some leveraged investors suffered significant losses due to concentrated positions, and position liquidation and deleveraging operations further amplified market fluctuations. However, the overall operation of the market was still orderly at the time, and there were no signs of spreading to the core financial market. At the same time, the Bank of England warned that if the market's expectations on the speed of development of AI technology, the commercialization process, or the profitability of related companies are adjusted more drastically, it may still trigger a more drastic market correction.
For the Bank of England, the key now is to distinguish between normal market valuation adjustments and financial contagion that may cause systemic risk. The fall in AI companies' stock prices itself does not necessarily mean that financial stability is threatened, but if the links between overvalued assets, leveraged investors, private credit, and bank financing are further deepened, the reversal of market sentiment may have a greater impact through channels such as contraction of financing, asset sell-off, and spread of credit risk. Breeden's statement also reflects the Bank of England's policy orientation — not trying to prevent the market from repricing AI assets, but rather wants to ensure that this process does not evolve into a broader financial stability issue.
Furthermore, Briden also pointed out that overall, in the face of soaring energy prices and rising costs and tax burdens, the British private sector showed more resilience than expected, because companies have learned to adapt to repeated supply shocks. She said, “In the UK, I think what surprised us the most was the ability of companies to adapt to shocks. They're used to having to be flexible — costs rise in some areas and cut costs in others.”
By absorbing the impact of shocks, companies slow the transmission of costs to inflation. However, Briden warned that it is impossible for companies to absorb the impact entirely through profit margins, so “after all, there is limited room for this kind of approach.” She said that the next question is whether companies will raise prices or weaken demand.
The Bank of England raised interest rates by 25 basis points to 4% as scheduled last week, but warned that the inflation rate in 2027 could reach around 5%, more than double its 2% inflation target. The bank's monetary policy committee warned that interest rates may need to be raised at least once to curb the rise in consumer prices.
The Bank of England's Deputy Governor in charge of monetary policy affairs, Claire Lombardley said in an interview that it may be reasonable to raise interest rates by another 25 basis points as early as December. She said, “For us, every interest rate meeting has the potential to act. In December, you know, of course this is possible.”
Lombardelli added, “I think it depends on what we look at conflict situations and energy prices, as well as what we see from broader economic data and how all of these factors interact. But I wouldn't rule out that possibility. Also, I don't have enough information to make a decision at this point.”