A report by the BBC quoted Bailey as saying the Bank was watching huge investments in AI very carefully.

He said not everyone investing in AI would come out a winner, warning that asset prices of some companies could fall.

“You could see some correction of asset prices at some point. Everybody is currently priced to be a winner, but you look back at the past, not everybody is a winner

“Google was not the first market leader in internet search. It was Netscape. Nobody can remember Netscape today. It does not exist,” the BBC quoted him as saying.

Bailey said AI had great potential to strengthen economic growth but also comes with serious risks.

He said the Bank of England was keeping a close eye on the large sums of money flowing into AI companies, adding that AI chipmaker Nvidia had become the world’s most valuable listed company, with a market value of 5.5 trillion dollars.

Bailey said that the huge amounts of money being loaned to AI firms were causing markets to value some of them as multi-trillion-dollar businesses.

He argued that this level of investment carried risks, particularly if the big bets being made on AI did not pay off as investors expected.

Bailey said tech companies such as Alphabet, Meta, Microsoft and Amazon were also spending hundreds of billions of dollars on AI.

He added that major AI companies, including Anthropic and OpenAI, were preparing to sell shares on the United States stock market.

“There is a very large amount of investment going into this sector now, and that is natural because it is a major area of growth. Asset prices of companies developing AI have gone up a lot, reflecting high expectations of what it can deliver

“We are prepared for the fact that there will be some shocks to markets, and we have to make sure the system is resilient,” he said.

Bailey also warned that AI was being used to carry out cyber-attacks, describing it as a powerful tool for finding weaknesses in computer systems.

Bailey said AI has revealed things that have been hidden in operating software that many organisations has relied on for years.

He said AI has created a much more powerful way of uncovering hidden problems in software that many organisations rely on.

He warned that in the wrong hands, AI could become a very dangerous tool.

The governor also raised concerns about deep fakes, saying AI-generated images and videos could be used to deceive the public.

He said he had experienced this personally, after fake images of him and a public figure in a fight were shared on social media.

He said the Bank had struggled to trace where the fake images came from and called on the technology industry for help.

“We need a lot of help from the tech sector to trace these things back,” he said.

Despite the risks, Bailey said AI also has clear benefits, including its ability to speed up work that supported interest rate decisions.

He said AI is not making the decisions but is a useful tool in the hands of policymakers.

“It is not taking a decision, but it is a tool in the hands of the policy maker and that is good,” he said. (NAN)