Key takeaways
- IMF warns AI slowdown could weaken US economic growth
- US GDP could fall 1.8% below baseline projections
- Central banks face tougher decisions amid persistent inflation
The International Monetary Fund has warned that slowing artificial intelligence investment could complicate central banks' efforts to control inflation, as an earlier IMF downside scenario shows US economic output potentially falling 1.8% below expectations by 2028.
Speaking in Washington on November 6, IMF Managing Director Kristalina Georgieva said policymakers would need to consider any weakening in AI-driven growth when setting interest rates. Her comments followed a sharp technology-stock selloff that intensified concerns about the sustainability of enormous AI infrastructure investments.
In an October IMF assessment, Georgieva described AI investment as a major source of economic expansion but warned that disappointing returns, leverage and concentrated market exposure could transmit losses across the financial system.
IMF Warns AI Slowdown Could Reduce US GDP by 1.8%
The IMF's October World Economic Outlook examined a scenario in which a sharp reversal in AI investment triggers declining asset prices, weaker business spending and slower economic activity.
Under that adverse scenario, global GDP could be 1.1% below baseline projections by 2028, with US output 1.8% below its expected level.
These figures are not forecasts of outright economic contraction. They measure how much smaller economies could become relative to the IMF's central projections if the investment boom reverses.
The risks are particularly relevant to the United States, where AI infrastructure investment has supported construction, semiconductor demand and economic activity.
The warning follows a November 5 Nasdaq correction, as investors reassess whether AI companies can generate sufficient profits to justify their infrastructure spending.
AI Investment Creates a New Inflation Problem
Artificial intelligence is creating an unusual challenge for monetary policymakers.
Building data centers requires enormous investments in electricity, construction materials, semiconductor equipment and computing infrastructure. That spending supports economic growth but can simultaneously increase demand and inflationary pressure.
Georgieva said the investment boom was helping some economies offset the negative effects of the Middle East oil-supply shock while also contributing to financial stability concerns.
The tension has already attracted attention from Federal Reserve policymakers, who have warned that AI spending could raise costs before promised productivity improvements materialize.
If investment slows, economic growth could weaken, potentially creating pressure for lower interest rates. However, persistent energy-related inflation could push central banks toward maintaining restrictive policies.
Why an AI Stock Crash Could Spread Beyond Technology
The IMF's concerns extend beyond declining semiconductor share prices.
Large technology companies increasingly rely on financing arrangements involving cloud providers, chip manufacturers and AI developers. In October, the IMF warned that hyperscalers' share of global investment-grade bond issuance had risen from less than 1% in 2024 to approximately 10%.
That growing borrowing exposure means disappointing AI returns could pressure both stock and credit markets.
The vulnerability has become visible in CoreWeave's credit market, where default protection costs have climbed as investors question highly leveraged AI expansion.
Meanwhile, technology fund withdrawals illustrate how investors are reassessing exposure even while broader equity markets attract capital.
