The Bank of England (BOE) is actively investigating the emerging financial practice of lending to data centers as a way for financiers to speculate on the future of Artificial Intelligence (AI).
Key Areas of BOE Concern:
- Financial Stability Risk: The BOE is concerned that if the massive, debt-financed investment projected for AI infrastructure (estimated at $6.7 trillion by 2030) materializes, it could create significant risks to financial stability.
- Exposure Points: Banks could face exposure both directly through loans to AI companies, and indirectly through lending to private credit funds and other institutions heavily invested in AI-impacted assets.
- Speculative Bets: The rise in data center lending is seen as one of the few avenues for investors to place large, speculative bets on the AI sector, given the limited availability of pure AI stocks. The BOE launched its investigation after observing a shift in spending from hiring staff to funding data center construction.
- AI Correction Warning: This new probe follows previous warnings from the BOE that the high valuations of many AI companies could lead to a sudden and severe correction, potentially reminiscent of the early dot-com bubble.
Contrast with Crypto Stance:
The article notes a contrast in the BOE's approach to AI speculation and its stance on the cryptocurrency market:
- Potential AI Curbs: The BOE's investigation into data center lending could foreshadow future regulatory limits that might curb investment returns and potentially slow AI innovation.
- Crypto Restrictions: Meanwhile, the BOE has faced criticism from the UK crypto industry for a now-retracted proposal to severely limit individual stablecoin holdings (to between $\text{\pounds}10,000$ and $\text{\pounds}20,000$). Separately, UK banks have already imposed their own restrictive measures, with many crypto payments being blocked or delayed.
Ultimately, the Bank of England views these new lending practices in the AI sphere as warranting close scrutiny due to their potential to trigger broader financial instability.
October 2025, Cryptoniteuae