AI bubble fears are back, but whether there is an AI bubble at all is an open question, and nobody can say yet. In the same week, the IMF warned about risks linked to artificial intelligence (AI), shares of the AI cloud company CoreWeave fell sharply, and chip stocks slid in Asia and the US. This post explains, in plain words, what the IMF actually said.
One point first. This is not a claim that AI is a bubble, and it is not a prediction that AI will crash. It is a look at one warning from a respected institution and a few market moves around it.
Where this post comes from. The AI bubble debate has been in the headlines this week. Our main reference is the IMF blog post “Global Financial Markets Face Rising Risks From AI, Bond Yields, and Cyberattacks”, published on 13 October 2026 and based on the IMF’s October 2026 Global Financial Stability Report. We also used a DW News video, a Bloomberg Television video and two Yahoo Finance reports, each named where it appears and listed at the end.
What Is an AI Bubble, and Why Is the IMF Talking About It?
A market bubble is when prices rise much faster than the profits behind them, until a sharp fall brings them back down. The IMF, an international body that watches the health of the world economy, did not use the word bubble. Its blog says financial markets have stayed resilient, but three risks have been growing: a correction in AI-linked asset prices, a sharp rise in government bond yields, and cyberattacks.
The IMF says AI has become an important support for the economy and markets. Money flowing into data centres, chips and related infrastructure has boosted activity, and the companies driving the boom have reported exceptional earnings growth. The worry is what happens if AI investment and profits turn out weaker than hoped. Then prices of AI-linked assets could correct.
Borrowing is a key part of that worry. The IMF notes that hyperscalers, the largest data centre operators, are borrowing more, and some investors have borrowed money to buy AI stocks. Borrowed money can make a fall bigger, because people may be forced to sell when prices drop.
Circular Financing: A Risk Behind the AI Bubble Talk
The IMF also points to something called circular financing. In simple terms, it means money going around in a circle between AI companies. Here is a made-up example, not a real deal. Company A invests in Company B. Company B then promises to spend much of that money on Company A’s products. Company A’s sales look bigger because of Company B’s spending, but Company B’s spending depends on Company A’s money.
The IMF reviewed 14 such transactions since 2023. It found about $300 billion in equity investments and $650 billion in debt, in exchange for $1.4 trillion in future revenue commitments. The risk it describes is simple. If one of the companies receiving investment runs into stress, revenue forecasts and valuations across the chain could fall, which would weaken the value of the debt in those deals.
CoreWeave: Why One Company Moved the AI Bubble Debate
CoreWeave is what Bloomberg calls a “neocloud”: a company that builds and runs data centres used only for AI work. Bloomberg’s video description says it is supplied only by Nvidia chips and runs AI processing for OpenAI and Microsoft.
CoreWeave shares fell more than 15% on Wednesday, 14 October, after a chart of its rising borrowing costs spread on social media. Yahoo Finance reported that the yield on its $1.25 billion of bonds due in 2032 touched 15% and closed at a new high of 14.5% the day before. A bond’s yield rises as its price falls, so a high yield means lenders want a steep return to lend the company money. DW News said the company’s bonds had fallen to levels that usually signal distress.
Debt is the heart of the concern. Yahoo Finance data shows total debt of about $52 billion at the end of June, up from about $15 billion a year earlier. Interest expense rose to $640 million in the second quarter from $267 million, and the company lost $626 million in the quarter, even as revenue more than doubled to $2.58 billion. DW News put the debt at around $50 billion.
Nvidia is both CoreWeave’s chip supplier and one of its largest shareholders, and Investing.com says such supplier support has raised concerns about circular financing. The IMF does not name individual companies, so this is an example of the kind of link it describes, not part of its findings.
The company and its biggest supplier see it differently. According to Bloomberg, as reported by Yahoo Finance, CoreWeave’s CEO told staff that markets sometimes misunderstand and act irrationally when a new kind of technology company is being built, and that he is confident in the business model. Nvidia’s CEO Jensen Huang said on Thursday that CoreWeave needs no backstop from Nvidia and that its cost of capital is falling, according to Investing.com, and CoreWeave shares bounced off their lows, according to Benzinga.
We know little else about the company beyond these reports, and this post is not a view on the stock.
Chip Stocks Slide, but Not Everything Points Down
Chip shares came under pressure too. Yahoo Finance reported on Thursday, 15 October that South Korea’s KOSPI index was down 7% as a global chip sell-off deepened, with Nvidia and AMD down more than 2% and 3% in the US. SK Hynix and Samsung Electronics fell 11% and 9%, which Yahoo links to concerns about competition from China. Together they make up more than half of South Korea’s stock market value.
Yahoo also ties the US chip decline to worries about more US interest rate hikes after a hot inflation reading, colliding with fears about AI-related debt. So several things moved at once, not only AI. The same report adds a counterpoint: TSMC, the world’s largest contract chipmaker, reported third-quarter profit up 69% from a year earlier and forecast fourth-quarter revenue of as much as $54.3 billion, well above analysts’ expectations.
The same Thursday was not one-way for CoreWeave either. Benzinga reported that its shares fell about 6% before the open on worries about AI-related borrowing, then erased the loss and traded higher by the afternoon, while Yahoo Finance had chip stocks extending their losses early in the day.
Will the AI Bubble Burst? Nobody Knows
In the DW News interview, Ruchir Sharma, author of The Global AI Bust, argued that the bigger a technology breakthrough, the bigger the market bubble that tends to come with it. In his view the technology is real, but investors get over-excited and pour in money, and few of the companies end up profitable. So the technology lasts, but few investors make money from it. DW News video
A line from the same video, at about the 7:34 mark, puts the idea neatly: a bubble can be “a good idea taken too far”.
That is one view. The heads of CoreWeave and Nvidia see the sell-off differently, and TSMC’s results suggest demand for AI chips is still growing. The IMF itself describes risks, not certainties.
AI Bubble Fears and India
India’s AI story looks different. Goldman Sachs found 42 Indian companies it calls “AI Enablers”, which supply power equipment, cables and data centre hardware rather than AI chips themselves. As our earlier article noted, the group traded at about 36 times expected yearly profit, which is not cheap. We also looked at a free index of AI-linked Indian companies in India’s AI Treasure Map, and at the country’s chip ecosystem in India’s Semiconductor Ambition Is Not Just Talk.
The IMF notes that higher bond yields can raise discount rates and pull down valuations across assets, including AI-related ones. That is why it matters for India too. We explained the link in Why US Bond Yields Are Bad News for Indian Stocks.
Our Reaction to the IMF’s AI Warning
This post is a reaction to reading the IMF blog, watching the DW and Bloomberg videos, and seeing CoreWeave’s share price and the news from South Korea. We do not think the AI story is over. What we are unsure about is valuation: how much investors are paying today for profits that are still to come. For India, we believe there is a lot still to build and a lot of room to grow.
This post is for information only and is not investment advice. Figures are as reported by the sources listed and may change, and market prices move quickly. Any mistakes in summarising them are ours.
Key takeaways
- What the IMF said: Its October 2026 blog names three growing risks: a correction in AI-linked prices, a sharp rise in government bond yields, and cyberattacks. It did not call AI a bubble.
- Why debt matters: The IMF says hyperscalers are borrowing more and some investors have borrowed to buy AI stocks. It found about $300 billion of equity, $650 billion of debt and $1.4 trillion of revenue commitments across 14 circular deals since 2023.
- What happened in markets: CoreWeave fell more than 15% on 14 October and chip stocks slid on 15 October, but TSMC reported third-quarter profit up 69%.
- What this is not: A warning about risks is not a prediction of a crash. The open question is valuation, not whether the technology is real.
Frequently asked questions
An AI bubble would mean prices of AI-linked shares and assets have risen far beyond the profits behind them, so a sharp fall could follow. The IMF has not called it a bubble. It warns that weaker AI investment or profits could lead to a correction in AI-related asset prices.
Nobody knows yet. Ruchir Sharma argues that big technology breakthroughs tend to come with big bubbles, while CoreWeave’s CEO says the market is misunderstanding his company, and TSMC’s third-quarter profit rose 69%. This post does not take a side.
No one can say. The IMF lists an AI-related correction as one of three growing risks and points to borrowing and circular financing, but it describes a risk, not a forecast.
It is money going around between AI companies, where one company invests in or lends to another, and the second spends that money on the first company’s products. The IMF found about $300 billion in equity and $650 billion in debt in 14 such deals since 2023.
It said AI has supported the economy and markets, but weaker investment and profits could trigger a correction in AI-linked prices, made worse by rising borrowing and concentrated exposures.
CoreWeave is a “neocloud” company that builds data centres used only for AI work, according to Bloomberg. Its shares fell more than 15% on 14 October amid worries about its debt, which Yahoo Finance put at about $52 billion.
Sources
Main sources
IMF Blog, “Global Financial Markets Face Rising Risks From AI, Bond Yields, and Cyberattacks,” by Athanasios Vamvakidis and Jason Wu, 13 October 2026: https://www.imf.org/en/blogs/articles/2026/10/12/global-financial-markets-face-rising-risks-from-ai-bond-yields-and-cyberattacks
DW News, “AI bubble fears: Could a crash trigger a global financial crisis?” (video, 15 October 2026): https://www.youtube.com/watch?v=tGRB8ECyEJ0
Yahoo Finance, “‘Yikes’: CoreWeave stock tanks on bond yield woes, CEO blames market ‘irrationally’,” by Michael B. Kelley, 14 October 2026: https://finance.yahoo.com/technology/article/yikes-coreweave-stock-tanks-on-bond-yield-woes-ceo-blames-market-irrationally-180128363.html
Other sources
IMF, Global Financial Stability Report, October 2026, Chapter 1 (the page did not open for us, so we did not read it): https://www.imf.org/en/publications/gfsr/issues/2026/10/13/global-financial-stability-report-october-2026?cid=bl-com-am26-PB_GFSR
Bloomberg Television, “Nvidia CEO Downplays CoreWeave Concerns After Risk Gauge Soars” (video, 15 October 2026): https://www.youtube.com/watch?v=paWIWesI9k0
Yahoo Finance, “Global chip sell-off deepens as South Korean market plunges,” by Ines Ferré, 15 October 2026: https://finance.yahoo.com/markets/stocks/article/global-chip-sell-off-deepens-as-south-korean-market-plunges-024927049.html
Investing.com, “Nvidia CEO says CoreWeave needs no backstop as shares extend slide,” by Louis Juricic, 15 October 2026: https://www.investing.com/news/stock-market-news/nvidia-ceo-says-coreweave-needs-no-backstop-as-shares-extend-slide-4952315
Benzinga, via TradingView, report on CoreWeave’s rebound after Nvidia CEO Jensen Huang’s comments (published on a Thursday; the article gives no calendar date): https://www.tradingview.com/news/benzinga:164f491ec094b:0-coreweave-stock-snaps-back-as-nvidia-ceo-signals-support/
Axczel Research Insights, “India’s Hidden AI Story: The Companies Building the Backbone” (21 September 2026), which reports on a Goldman Sachs study: https://insights.axczel.com/article/india-ai-enablers/
I used Claude, an AI assistant, to rephrase my notes to make it reader friendly.