Business
Bank of England warns of AI bubble risk
Archie MitchellBusiness reporter
PA MediaThe Bank of England has warned of a “sharp correction” in the value of major tech companies with growing fears of an artificial intelligence (AI) bubble.
It said share prices in the UK are close to the “most stretched” they have been since the 2008 global financial crisis, while equity valuations in the US are reminiscent of those before the dotcom bubble burst.
The central bank’s financial stability report warned valuations are “particularly stretched” for companies focused on AI.
In its report the Bank also announced plans to lower the amount of capital High Street banks need to hold in a bid to boost lending and spur economic growth.
It marks the first reduction in the amount lenders need to hold since the 2008 financial crisis, and followed stress tests showing they would be able to withstand a crisis scenario with unemployment doubling, house prices plummeting and the economy contracting by 5%.
AI bubble fears
The Bank said the growth of the AI sector in the next five years would be fuelled by trillions of dollars of debt, raising financial stability risks if the value of the companies falls.
It cited industry figures forecasting spending on AI infrastructure could top $5tn (£3.8tn) and said much of this would be funded by AI firms themselves, but around half would come from outside sources, mostly through debt.
“Deeper links between AI firms and credit markets, and increasing interconnections between those firms, mean that, should an asset price correction occur, losses on lending could increase financial stability risks,” it said.
The Bank of England is the latest institution to sound the alarm over a potential crash in the value of AI firms reminiscent of previous incidents such as the dotcom bubble.
Jamie Dimon, the chief executive of US bank JP Morgan, told the BBC in October he was “far more worried than others” about the risk of a serious market correction in the coming years.
The International Monetary Fund and the Organization for Economic Co-operation and Development have also warned of price corrections.
The dotcom booms refers to a period in the late 1990s, during which the values of early internet companies surged on a wave of optimism for what was then a new technology, before the bubble burst in early 2000 – with many share prices collapsing.
This led to some companies going bust, resulting in job losses.
A drop in share prices can also hit the value of people’s savings including their pension funds.
Fears over an AI-related stock market correction come as Chancellor Rachel Reeves used her Budget to encourage savers to pile cash into stocks and shares by reducing the amounts which can be saved in cash Isas.
Bank of England governor Andrew Bailey has previously raised fears about a potential financial crash, warning after the collapse of two US companies that “alarm bells” were ringing.
On Tuesday he said the AI sector in the US is “very concentrated”, making up a large portion of the value of the country’s stock market.
But he added: “There is a difference to the dotcom situation in that these companies have got positive cash flows, they are not created on hope.
“But, as we see, and we saw last week in the debate about whether Google is moving onto Nvidia’s patch, it doesn’t mean to say everybody is going to win, it doesn’t mean to say everyone is going to win equally.
“It is important to be clear it is not inconsistent, quite consistent in fact that AI turns out to be the next general purpose technology in terms of prompting productivity growth across economies. I hope it is, but we’ll see.”
Global risks
The central bank also said the risks to financial stability had risen during 2025, citing geopolitical tensions, global trade wars and rising borrowing costs for governments.
It said growing tension between countries had specifically raised the prospect of cyber-attacks and other disruptions.
After assessing High Street lenders’ ability to cope in a crisis situation, the Bank has proposed lowering the benchmark for Tier 1 capital requirements for firms to 13% from the 14% level it has been at since 2015. The requirement refers to the buffer banks must hold in case of any losses from risky lending.
The central bank said this would still give firms a £60bn buffer against their minimum requirements so they would be able to continue lending to households and companies.
The Bank’s Financial Policy Committee said lowering the threshold would make it easier for lenders to offer loans to households and businesses. The changes are due to come into force in 2027.
Elsewhere in the financial stability report, the Bank warned homeowners coming off fixed-rate mortgages in the next two years face a £64 increase in their monthly repayments.
The central bank said the typical owner-occupier coming off a fixed rate would see an 8% jump in their bills as the impact of higher interest rates continues to bite.
In total, 3.9 million people, or 43% of mortgage holders, are expected to refinance at higher rates by 2028, the Bank said.
But a third will see their monthly payments fall in that period, it added, with interest rates having fallen significantly since a spike in 2022.
The Bank of England’s base rate, which influences the cost of borrowing for individuals, including mortgages, has fallen from 5.25% in 2024 to its current 4%.
Car-sharing firm Zipcar has confirmed it is stopping operations in the UK after launching a consultation late last year.
The move will hit the company’s roughly 650,000 drivers across the country.
On December 1, the US-based company told customers in the UK that it planned to suspend new bookings temporarily at the turn of the year.
The business, which had 71 UK employees at the end of 2024, launched a formal consultation with staff as a result.
On Friday, in a fresh email to customers, the business said it “can now confirm that Zipcar will cease operating in the UK”.
The company added: “In accordance with clause 7.5 of the member terms, please take this as your written notice that we will formally close your account in 30 days’ time.
“It’s not possible to make any new bookings with Zipcar UK at this time, but your account will remain open until February 16.”
It added that customers will be entitled to a pro-rated refund for any remaining periods on current plans or subscriptions, from the start of 2026.
Zipcar said this will be done automatically and will not require any action from users.
Accounts showed that the van and car hire firm saw losses deepen to £5.7 million in 2024 after a decrease in customer trips.
New Delhi: Good news for investors and market watchers! Even though February 1 falls on a Sunday this year, the Indian stock markets will remain open for trading on Budget Day. Both the BSE and NSE announced on January 16 that trading will take place as per normal market hours on February 1 for Budget 2026. This special arrangement ensures that investors can react to Budget announcements in real time, without waiting for the next trading session.
The NSE clarified the special trading arrangement in a circular, stating, “On account of the presentation of the Union Budget, members are requested to note that Exchange shall be conducting live trading session on February 01, 2026, as per the standard market timings (9:15 am-3:30 pm),” said NSE in a circular.
Union Budget 2026 to be presented on February 1 at 11 am
The Union Budget for 2026 will be presented at 11 am on Sunday, February 1, the Lok Sabha Speaker confirmed on January 12. In recent years, February 1 has become the fixed date for the annual Budget presentation, a trend that continued with the 2025 Budget as well. The upcoming Budget will also be a significant milestone for Finance Minister Nirmala Sitharaman, as it will be her ninth consecutive Union Budget, placing her among finance ministers with the longest uninterrupted Budget tenures.
Trading details for Budget Day explained
While most core market segments will remain open during regular trading hours on Budget Day, some services will stay shut. The BSE has clarified that the T+0 settlement session and the auction session meant for settlement defaults will not be operational. At the same time, the NSE confirmed that trading in capital markets and derivatives will continue as usual.
Stock market holiday list remains the same
The stock market holiday calendar for 2026 remains unchanged, with Indian exchanges observing 16 public holidays apart from weekends. The next scheduled market closure this month will be on January 26. In the first half of the year, markets will remain shut on key occasions such as Holi (March 3), Ram Navami (March 26), Mahavir Jayanti (March 31) and Good Friday (April 3). Trading will also be suspended on Ambedkar Jayanti (April 14), Maharashtra Day (May 1) and Bakri Id (May 28).
In the second half of the year, markets will close on Muharram (June 26), Ganesh Chaturthi (September 14), Gandhi Jayanti (October 2), Dussehra (October 20), Diwali Balipratipada (November 10) and Guru Nanak Jayanti (November 24). Christmas, on December 25, will be the final market holiday of 2026.
Last Updated:
While bulk deals may reflect emerging interest in a stock, block deals are usually pre-planned and involve large institutional investors
Market experts say tracking bulk and block deals can offer useful insights into the actions of large investors and institutions. (Representational Photo)
Investors tracking stock market movements often come across terms such as ‘bulk deal’ and ‘block deal’ in daily trading updates. At times, a sharp rise or fall in a stock price can be traced back to these large transactions. Understanding what these deals mean, how they differ, and why they matter can help investors make better sense of market activity.
Bulk Deal
A bulk deal occurs when an investor or institution buys or sells 0.5% or more of a company’s total equity shares in a single trading day. Such transactions take place during normal market hours and are disclosed by the stock exchanges after the market closes.
Bulk deals can have an immediate impact on a stock’s price, as heavy buying or selling often signals strong interest or exit by a large investor. Retail investors sometimes view bulk purchases by institutional players as a vote of confidence in the company.
Block Deal
A block deal is executed through a special trading window provided by the stock exchanges. To qualify as a block deal, the transaction must involve at least 5 lakh shares or be valued at more than Rs 5 crore. These deals are carried out during a specific time slot known as the block deal window, and both the buyer and seller are identified beforehand.
The main objective is to facilitate large transactions without causing excessive volatility in the open market. Unlike bulk deals, block deals are reported to the exchanges immediately.
Differences Between Bulk and Block Deals
Bulk deals are executed during regular trading hours and typically involve relatively smaller quantities compared to block deals. They are disclosed at the end of the trading session. Block deals, on the other hand, are meant for very large transactions, take place in a designated time window, and are reported in real time.
While bulk deals may reflect emerging interest in a stock, block deals are usually pre-planned and involve large institutional investors.
Types of Deals in the Stock Market
There are broadly four types of transactions in the equity market. Regular trading deals involve routine buying and selling by investors on the exchange. Bulk deals refer to large trades crossing the 0.5% threshold of a company’s equity in a day. Block deals are high-value or high-volume transactions conducted through a special window.
Off-market deals involve the transfer of shares outside the exchange platform, such as inter-promoter transfers or strategic stake sales.
What Should Investors Keep in Mind?
Market experts say tracking bulk and block deals can offer useful insights into the actions of large investors and institutions. However, they caution against making investment decisions based solely on these transactions. Investors are advised to also consider a company’s fundamentals, financial performance, management quality and long-term growth prospects.
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January 16, 2026, 20:26 IST
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