A potential burst in the artificial intelligence sector could set off an unusual economic downturn, according to recent analysis. While AI has driven significant investment and innovation, a sudden reversal in market sentiment might lead to broader financial instability. The concern stems from the possibility that inflated valuations in the tech sector could unravel, triggering ripple effects across global markets. This scenario would differ from traditional recessions, as it may originate not from consumer demand or monetary policy, but from speculative overreach in emerging technologies. Trade dynamics and currency fluctuations further complicate the outlook, particularly in economies heavily reliant on technology exports. Policymakers are being urged to monitor asset valuations closely, especially in high-growth sectors where investor enthusiasm may outpace underlying fundamentals. Without timely intervention, a correction could disrupt financial systems in unexpected ways.
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How markets could topple the economy
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