AI in action · Markets

The IMF Counted $1.4 Trillion of Promises Inside the AI Boom's Circular Deals

In its October 2026 stability report the IMF named an AI-driven market correction as one of three rising threats, and traced 14 deals in which AI money goes round in a circle. Its managing director said the world economy is "standing on one leg, the AI leg".

Oct 16, 2026

Twice a year the International Monetary Fund publishes a Global Financial Stability Report that lists what could break. The October 2026 edition, released at the IMF and World Bank annual meetings in Bangkok on October 13, put three items at the top: a correction in AI-linked markets, a sharper rise in government bond yields, and cyberattacks.

The most concrete part of the AI section is a count. The IMF reviewed 14 so-called circular financing deals struck since 2023, in which chipmakers, cloud providers and AI developers invest in or lend to one another and are paid back through purchases of each other's products. Together they involve about $300 billion of equity and $650 billion of debt, exchanged for roughly $1.4 trillion of commitments to future revenue, according to an IMF blog by Athanasios Vamvakidis and Yizhi Wu.

The mechanism the IMF worries about is simple. Large technology companies are borrowing more to build data centres, and some investors are using leverage to buy AI shares. If one company in the chain comes under stress, the revenue it promised to the others is suddenly in doubt, their valuations fall, and so does the value of debt secured on those deals. The report's bank stress test found that lenders holding 22% of global banking assets would end up below regulatory capital limits in a severe scenario, up from 18% a year earlier.

The companion World Economic Outlook put a number on the downside. In a scenario where AI investment drops steeply, global output would be 1.1% lower by 2028 and US output 1.8% lower, according to Reuters. Petya Koeva Brooks, the IMF's deputy research director, said that even this case would not mean a global recession. Managing director Kristalina Georgieva was blunter about the dependence: "We now have an economy that is standing on one leg, the AI leg," she said, as quoted by Reuters.

The IMF's advice is aimed at supervisors rather than investors: limit leverage and liquidity mismatches in AI financing, private credit and non-bank lenders, including through sector-specific capital requirements and caps on how concentrated a bank's exposure to the theme can be. For anyone holding AI shares, the useful takeaway is the map itself — the same handful of companies appear on both sides of many of these deals, which is why a problem at one of them rarely stays there.

Sources: IMF Blog — Global financial markets face rising risks from AI, bond yields and cyberattacks (Oct 12, 2026); Reuters via Kitco — IMF flags risks to global economy from AI market correction, war and debt (Oct 13, 2026)