Former Reserve Bank of India governor Raghuram Rajan has warned that the global frenzy around artificial intelligence may be overlooking major economic and political risks.
Rajan argued that investors and policymakers are treating the sector with excessive optimism despite mounting vulnerabilities.
He said the rapid rise of generative AI has created a market euphoria similar to earlier technology booms, even as key structural challenges remain unresolved.
Rajan highlighted several risks, including the growing dependence of AI companies on debt financing, compute shortages, and the possibility that advances in large language models could begin to plateau.
He also cautioned that the AI industry could face a sharp correction if technological progress slows while investment expectations remain elevated.
Rajan further pointed to the risk of political backlash against AI, especially if the technology contributes to large-scale job displacement or widening inequality.
