In its 2025 Financial Stability Review, the Monetary Authority of Singapore (MAS) has issued a warning about the potential risks associated with the rapid adoption of AI in the financial sector. The review noted that (1) equity markets are seeing “relatively stretched valuations concentrated in the technology and AI sectors”; (2) some Big Tech firms (primarily hyperscalers) have turned to the use of novel and potentially circular private financing arrangements to fund their expansions, including the use of special purpose vehicles, private credit structures and novel accounting treatment that could mask leverage and increase funding dependencies; and (3) many major AI companies will be financially exposed if the compounding revenue story for them does not play out (which is a possibility). MAS urges financial institutions to implement comprehensive risk management practices to ensure the responsible use of AI technologies.
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