AI shares now propping up global markets, IMF warns
Key Points
- IMF projected global growth of 3.0% in 2026 and 3.4% in 2027
- AI investment is offsetting the economic drag from the Middle East war
- Top four AI hardware exporters beat forecasts by 4.4 percentage points
- Korea grew 7.5% annualised on semiconductor and AI exports
- IMF warned frothy AI valuations risk a sharp correction
AI stocks and investments are now holding up global markets and growth against the drag of the Middle East war, the International Monetary Fund has warned, leaving the world economy exposed if the boom falters.
In its July 2026 World Economic Outlook Update, the IMF projected global growth of 3% in 2026 and 3.4% in 2027, down from an average of 3.5% across 2024 and 2025.
It said the slowdown would have been deeper were it not for accelerated momentum in the global technology cycle, driven by advances in AI and its adoption, which is partly offsetting the negative supply shock from the war.
The group noted that global financial conditions remain accommodative by historical standards and have eased since early April, with corporate bond spreads historically tight and equity markets strengthening despite higher expected policy rates.
Stock markets with sizable AI exposure, including the United States, Japan, Korea and Taiwan, are outperforming all others so far in the second quarter of 2026.
AI still boosting growth
The growth data shows the same pattern. The top four net exporters of AI-related hardware, Taiwan, Korea, Thailand and Malaysia, beat first-quarter forecasts by an average of 4.4 percentage points, while the rest of the world undershot by 0.3 percentage points.
Korea grew at an annualised 7.5%, more than four times the 1.8% the IMF projected in April, powered by a semiconductor and AI hardware export boom.
For UK consumers, the concentration cuts both ways. Pension funds and index trackers with heavy US equity weightings have been lifted by the rally, but the IMF warned that expectations around AI profitability could be revised downward, triggering an abrupt retrenchment in technology investment and a sharp correction in what it called frothy valuations.
Falling asset values would then hit household spending through wealth effects.
The Fund said such a repricing could tighten global financial conditions and weaken activity well beyond the technology sector, transmitting across borders through trade linkages and portfolio exposures.
It added that AI hype and exuberant financial markets could sow the seeds of macrofinancial instability even while supporting consumption in the short term.
