Expert comment: global stock market falls and growing concerns around AI investment

“Yesterday Wall Street had its worst day since April 2025. The S&P 500 fell 4.4%, the Nasdaq closed in correction territory. Until this week, losses had been concentrated in AI-related stocks. Between 6 October and the end of the month, 47 AI and chip stocks shed around $5 trillion in value, while the other 625 large US stocks in the same analysis gained $1.3 trillion.

“The US midterm elections on 3 November added to investors’ concerns. Democrats won both houses of Congress after a campaign in which energy bills featured prominently. Investors now expect tighter rules on power-hungry data centres. But doubts about AI investment predate the election. Rising energy costs and expensive borrowing put pressure on AI infrastructure providers that have borrowed heavily to expand. Investors are increasingly questioning whether the vast sums spent on AI will generate adequate returns, sending AI stocks plunging.

“London’s FTSE 100, with its relatively low exposure to technology stocks, fell only 0.4% on 5 November. That might make the sell-off look like an American problem. Greater Manchester is exposed too. Pensions and investments are the obvious concern, the Pensions Regulator warned last month that even apparently diversified portfolios may carry hidden AI-related risks. But the consequences could extend to the region’s growth plans and the cost of everyday services.

“A GMCA-commissioned study published last month identified 663 businesses developing or using AI and estimated the wider AI workforce across the city region at almost 11,000. Data centre projects are also planned or under development around Greater Manchester, including in Stockport. A prolonged investment downturn could delay these projects and weaken the prospects for jobs and business-rate revenue associated with them. Growth plans built around continued AI investment need to account for that possibility.

“Regional innovation strategies also need to look closely at what AI start-ups actually offer. Some provide much the same service as existing businesses, with their price advantage coming mainly from replacing human labour with AI. Lower prices can benefit customers, but the regional gains are less certain. Where these firms displace local employment and shift spending from wages to external technology suppliers, they can weaken the local economy. If AI charges then rise, their competitive advantage may disappear. The region risks losing established jobs and skills while backing replacement businesses that cannot survive higher costs.

“The same price risk applies to councils, firms and residents using AI. If investors become less willing to fund losses, providers may seek more revenue through higher charges or tighter usage limits. Organisations that have come to depend on these tools could then face higher bills. Price rises are not inevitable, but today’s terms cannot be assumed to last. Any increases would add to financial pressures following the Bank of England’s first interest-rate rise since 2023.

“Greater Manchester should keep adopting AI where it is useful, while preparing for higher costs and less investment. Public bodies should calculate what their services would cost if AI prices doubled, retain the skills needed to maintain essential services without these tools, and secure workable terms for switching suppliers or ending contracts.

“GMCA should test its growth plans against a prolonged downturn. Support for start-ups should consider improvements to services, sustainable employment and income retained locally, alongside business growth. The region’s plans should not depend on cheap AI and uninterrupted investment.”