The International Monetary Fund (IMF), in its “Global Financial Stability Report,” has warned the global markets against going into complacency, as the watchdog identified a potential artificial intelligence (AI) investment correction, rising government bond yields, and major cyberattacks as risks that could threaten financial stability despite the markets’ current resilience.
The report, released on Tuesday, states that while AI-related investment had helped offset some of the economic drag from the Iran war and broader policy uncertainty, there is also growing evidence that the technology’s capabilities might require less investment than anticipated, while the economic gains from the phenomenon could also fall short of expectations.
“An AI market correction will affect the real economy,” Athanasios Vamvakidis, deputy director in the IMF’s Monetary and Capital Markets Department, said at a press briefing in Bangkok.
Although global risk appetite remains strong, supported by solid corporate earnings and optimism surrounding AI, Vamvakidis cautioned against taking market resilience as an indicator for overall financial safety.
A correction could affect wealth and investment, potentially spreading losses across broader markets.
While each of the three risks, AI-driven selloff, sharp increase in sovereign bond yields, and a major cyberattack, can be managed independently, the IMF sees their interaction with existing vulnerabilities having wider systemic consequences.
The IMF warned that a slowdown in AI investment could expose growing leverage across the technology sector. If investor sentiment deteriorates, leveraged positions could force investors to sell assets, increasing volatility and amplifying market losses.
The scale of borrowing linked to major technology companies has grown significantly. Hyperscalers now account for 10% of global investment-grade bond issuance, compared with less than 1% in 2024, according to the report.
A sharp reassessment of AI valuations could therefore affect not only technology stocks but also credit markets and corporate investment. The IMF urged policymakers to address excessive leverage, including exposure through derivatives and margin loans, to limit the potential fallout.
“The consequences of an AI correction could be global,” the fund warned.
Bond market vulnerabilities have also increased since the IMF’s April report, with higher energy prices contributing to rising government bond yields. Elevated sovereign debt and unresolved fiscal deficits in major economies have added to investor concerns.
Vamvakidis said markets were increasingly focused on whether investors could absorb the large volume of government borrowing expected in the coming years, alongside growing private-sector issuance.
Central banks’ balance sheet reductions compound the challenge, making markets more reliant and leaving them more dependent on price-sensitive investors to finance the additional debt.
So far, bond markets have absorbed the pressure without major disruption. The IMF noted that hedge funds had been able to unwind some repurchase-agreement borrowing without triggering turmoil in repurchase, or repo, markets.
Nevertheless, the fund called on governments to place public debt on a sustainable path to reduce the risks associated with continued borrowing.
Cyberattacks represent a further threat, particularly as financial institutions become increasingly dependent on a relatively small number of critical technology providers.
The IMF said limited resources, especially in emerging markets, were making it harder to strengthen cyber defenses. In more than 70% of cases so far in 2026, software providers had almost no time to patch vulnerabilities before they were exploited, a 20-percentage-point increase from a year earlier.
Although AI can help organisations detect and address security threats, the technology is also making cyberattacks more sophisticated. A major incident affecting a critical service or financial institution could undermine confidence and transmit disruption across financial markets.
The IMF urged policymakers to strengthen cybersecurity capabilities and tighten oversight of third-party technology vendors.
The fund’s stress tests found that banks’ capital buffers remained robust under a hypothetical downturn involving weaker AI investment and fragile bond markets. However, the results also revealed vulnerabilities within parts of the banking system.
The latest test revealed that banks holding 22% of global banking assets have weak capital levels, an increase from 18% in the 2025 assessment.
The findings suggest that, while the global banking system could withstand the modeled downturn, vulnerabilities remain. The IMF’s broader warning is that strong market performance alone offers no guarantee against shocks, particularly when leverage, sovereign borrowing, and technological risks converge. technology providers.
The IMF said limited resources, especially in emerging markets, were making it harder to strengthen cyber defenses. In more than 70% of cases so far in 2026, software providers had almost no time to patch vulnerabilities before they were exploited, a 20-percentage-point increase from a year earlier.
Although AI can help organisations detect and address security threats, the technology is also making cyberattacks more sophisticated. A major incident affecting a critical service or financial institution could undermine confidence and transmit disruption across financial markets.
The IMF urged policymakers to strengthen cybersecurity capabilities and tighten oversight of third-party technology vendors.
The fund’s stress tests found that banks’ capital buffers remained robust under a hypothetical downturn involving weaker AI investment and fragile bond markets. However, the results also revealed vulnerabilities within parts of the banking system.
The latest test revealed that banks holding 22% of global banking assets have weak capital levels, an increase from 18% in the 2025 assessment.
The findings suggest that, while the global banking system could withstand the modeled downturn, vulnerabilities remain. The IMF’s broader warning is that strong market performance alone offers no guarantee against shocks, particularly when leverage, sovereign borrowing, and technological risks converge.