The Bank for International Settlements (BIS) has flagged financial vulnerabilities associated with AI-related financing, warning that the race to capture market share may have led to overinvestment, sowing the seeds of a sector-wide bust if returns disappoint. "This is one of the pressure points we see facing the global economy," Tao Zhang, chief representative of BIS for Asia and the Pacific, said, adding that there are financial vulnerabilities associated with AI-related financing. "Risk premia are compressed, asset valuations are stretched, and the financing of AI is increasingly leveraged and features complex interactions within the AI supply chain, " he said. The BIS has therefore highlighted the need for macroprudential policies to lean against persistently strong risk appetite and stressed the importance of greater transparency in private credit markets, particularly in sectors such as AI, Zhang said.