Bank for International Settlements warns: Market frenzy signals flash intensively, AI spending frenzy may end in sustained 'investment recession' BlockBeats News: On June 28th, the Bank for International Settlements (BIS) issued a stern warning in its annual economic report released on Sunday that the AI spending frenzy of large tech companies may end in a sustained "investment recession" and could impact financial markets and even the global economy. BIS pointed out that the current top five ultra large scale cloud providers are expected to invest a total of over $1 trillion by the end of 2025 to 2026. However, if the returns in the technology industry fall short of expectations, investors may quickly tighten their financing, leading to a sudden shift from a capital expenditure boom to a long-term investment recession. The report cites historical precedents - the canal construction in the 1830s, the British railway craze in the 1840s, and the Internet foam in the late 1990s - which share a common feature: "real technological breakthroughs attract capital beyond the support of commercial returns", and all ended in investment reversals, triggering economic recession. Just as BIS issued the warning, the market frenzy signals flashed: SpaceX launched a $25 billion bond issuance shortly after its record $86 billion IPO, which Allianz's chief investment officer pointed out this week directly, indicating that the market has entered the "foam region"; Technology companies are using credit spreads close to the lowest level of this century to heavily issue bonds in the global credit market to finance AI projects, with billions of dollars pouring in. BIS added that unlike previous cycles, households currently have a higher exposure to stocks related to relative wealth and income. If AI related stock markets experience a significant correction, the impact on the real economy will be more severe. At the same time, AI companies issuing a large number of bonds for financing may also endanger financial stability. In addition, the energy disruption caused by the near closure of the Strait of Hormuz continues to push up inflation, and global central banks are facing multiple pressures including sustained inflation, sustainability of AI investment, increased financial fragility, and deteriorating fiscal conditions. [Original link]