Overview

• The Financial Policy Committee said equity valuations, especially for AI-focused tech firms, look stretched and the probability of a sudden sell-off has increased.
• Index concentration has intensified, with the top five S&P 500 companies near 30% of market value, the highest level in roughly 50 years.
• Potential catalysts for a re-pricing include slower AI capability or adoption, tougher competition, power and data constraints, commodity bottlenecks, and shifts in AI infrastructure needs.
• The Bank warned that a global correction could materially affect the UK’s open economy and spill over to households and businesses already dealing with high living and borrowing costs.
• Broader fragilities include geopolitical strains and sovereign debt pressures, while some market voices such as Goldman Sachs see no bubble yet and advise diversification as earnings focus stays on AI-linked stocks.