The IMF Warns of a Risk to the Global Economy if the AI Investment Boom Reverses

The global economy, which the IMF describes as “surprisingly resilient,” could face serious shocks if the boom in artificial-intelligence investment were to reverse abruptly. The Fund issued the warning on Monday, ahead of a gathering of world leaders in Davos. In an update to the World Economic Outlook, the IMF said risks to global growth are tilted to the downside, as expansion relies on an exceptionally narrow set of drivers—above all the US technology sector and the associated surge in equity markets.

The Fund also expects the US economy to continue to outpace other G7 countries by a wide margin. According to IMF forecasts, US GDP growth will reach 2.4% in 2026 and 2% in 2027. Investment in technology has climbed to its highest share of the American economy since 2001 and has become one of the principal engines of current growth.

“There is a risk of a correction—a market correction—if expectations about productivity gains and profitability from AI fail to materialize,” said Pierre-Olivier Gourinchas, the IMF’s chief economist. He stressed that the current situation has not yet reached the scale of the dotcom bubble, but that grounds for concern are already emerging.

This week, Donald Trump will travel to Davos for the World Economic Forum. Discussions there are expected to combine upbeat assessments of US investment in AI with anxiety over stretched equity valuations and mounting pressure on key institutions, including the US Federal Reserve and NATO. Adding to the backdrop is the US president’s threat to impose 10% tariffs on European countries unless they agree to support his initiative to acquire Greenland.

The IMF noted that the global economy has shown greater resilience than expected, despite trade tensions linked to Trump’s policies and a rise in geopolitical risks. The Fund raised its global growth forecast for 2026 from 3.1% to 3.3%, and now expects only a slight slowdown to 3.2% in 2027. However, a renewed escalation of trade conflicts could once again darken the outlook. “Trade tensions could flare up again, prolonging uncertainty and weighing more heavily on economic activity,” the Fund warned.

According to the forecast, China’s economy will grow by 4.5% in 2026—0.3 percentage points above the IMF’s October estimates—before slowing to 4% in 2027. Among G7 countries, Canada is set to post the second-fastest growth rate after the United States this year, at 1.6%, with its economy accelerating to 1.9% in 2027. Forecasts for the United Kingdom in 2026 and 2027 were left unchanged, at 1.3% and 1.5% respectively. Germany’s GDP, the Fund estimates, will expand by 1.1% this year and by 1.5% next year.

The IMF stressed that global growth continues to rest on the “narrow base” of America’s AI-driven investment boom. If expectations of a surge in productivity prove overblown, this could trigger a sharp pullback in investment and a reversal in equity markets. By the Fund’s calculations, a decline in AI investment combined with a “moderate correction” in technology stock valuations could shave around 0.4 percentage points off global growth as early as this year.

Gourinchas noted that the share of market capitalization accounted for by technology companies in the economy today is “significantly higher” than it was during the dotcom bubble 25 years ago. In such circumstances, even a modest downturn could have a substantial impact on household wealth relative to incomes. He also pointed to rising leverage among the largest AI companies, which are financing investment through borrowing, as an additional risk factor. “When you see leverage increasing, it starts to raise concerns,” he said.

A sharp correction in the US equity market, the IMF warned, could trigger “significant wealth losses” beyond the United States, weighing on global consumption. The Fund also allows for a more optimistic scenario: if productivity gains from AI begin to materialize sooner than expected, they could add 0.3 percentage points to global growth in 2026 and between 0.1 and 0.8 percentage points a year over the medium term.

Separately, the IMF underscored the critical importance of central-bank independence following a recent announcement of a criminal investigation into Jerome Powell, the chair of the US Federal Reserve—an episode that had serious repercussions in financial markets. “Central-bank independence is absolutely essential to maintaining macroeconomic and financial stability and to laying the foundations for sustainable growth,” Gourinchas said. In the case of the Federal Reserve, he added, this is particularly vital given the dominant role of the US financial system in the global economy and the dollar’s central place in the international monetary system.