On June 28, the Bank for International Settlements, the institution that advises central banks worldwide, published its 2026 Annual Economic Report and named an AI capex bust as one of the top threats to global financial stability right now. BIS general manager Pablo Hernández de Cos framed the message as one of urgency, warning policymakers to act before any reversal makes the eventual adjustment more painful.

The report goes further than a soft caution. It explicitly compares the current AI buildout to canal mania in the 1830s, the British railway bubble of the 1840s, and the dot-com crash of 2000, noting that all three "ended with an eventual reversal in investment, inducing economy-wide recessions."

The five largest hyperscalers, Amazon, Microsoft, Google, Meta, and Oracle, are on track to spend more than $1 trillion combined on AI infrastructure across 2025 and 2026. Amazon alone is guiding to roughly $200 billion in 2026 capex, Microsoft to $190 billion, Google to $180 billion, and Meta up to $140 billion. That spending is now outpacing the earnings and free cash flow of these companies, which is exactly why several have started issuing debt to plug the gap rather than funding it from operations the way they used to.

This is the part that turns a tech story into a financial stability story. Private credit lending to AI-related companies has grown from roughly $3 billion in 2010 to over $40 billion in 2025, and direct lending funds have quadrupled their exposure to AI and IT over the past five years. The BIS also flagged "circular financing," deals where the same hyperscalers are simultaneously customers, investors, and lenders to each other, as a structure where assets risk being pledged multiple times. If AI returns disappoint, the BIS warns this could trigger a sudden pullback in financing and turn the current boom into a prolonged investment bust.

What makes this warning different from the usual bubble chatter is who's saying it. The BIS isn't claiming AI is fake or that the technology won't deliver. It openly credits AI with supporting global growth and acknowledges productivity gains of 20 to 50 percent in task-level studies. The concern is narrower and arguably scarier: every major player is making the same enormous bet at the same time, competing for dominance in a market that may only support a handful of winners. That dynamic, the BIS says, raises the risk of firms "over-committing resources to investment projects with still uncertain returns."

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