One signal

Modern Diplomacy’s Sana Khan argues that a slowdown in AI investment could push investors towards government bonds and ease borrowing costs for governments. The article points to recent falls in AI-linked shares alongside lower bond yields, while stressing that this is a possible shift in sentiment, not proof the AI boom has peaked.

The potential relief comes with a sizeable catch: the article says a sharp correction could also hurt growth and financial markets, leaving governments with more pressure on their budgets. Cheaper borrowing is less of a bargain if the economy takes a hit.

Discuss: Should governments treat a cooling AI market as a possible fiscal reprieve, or plan for the wider economic damage a sharp correction could bring?

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