The AI boom could trigger financial market shocks and the UK needs to be prepared, warns Andrew Bailey, governor of the Bank of England.

He says the central bank is carefully watching the massive investments in AI, with high expectations that not everyone will win.

The market valuation of AI companies, such as Nvidia, has skyrocketed, reflecting high hopes for future profits. However, Bailey warns that a burst bubble could occur, citing history as a reminder that not all big bets pay off.

He highlights additional risks, such as cyber attacks and deepfakes, while also acknowledging potential benefits in areas such as the Monetary Policy Committee's work.

Meanwhile, global bond yields are rising, putting pressure on public sector finances and indicating a shift in investor preferences towards AI and other assets.