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RBI governor warns AI stock repricing could raise market volatility

Sanjay Malhotra said leverage and weakening free cash flows among major AI firms could amplify corrections and volatility.

Reported · Written up by our desk · Asia

Reserve Bank of India Governor Sanjay Malhotra said India could benefit if the global selloff in AI linked stocks cools, but he warned that a sharp correction and repricing in developed markets could still unsettle investors.

Speaking at the Kautilya Economic Conclave in New Delhi on Saturday, Oct. 3, Malhotra said Indian shares have pulled back from recent highs in a way he described as controlled and smooth.

He added that as the AI investment cycle matures, any slowdown in AI spending or earnings could trigger a sharp repricing of financial assets, particularly across the AI value chain.

Malhotra also cited rising leverage tied to high risk appetite, along with declining free cash flows among major AI firms, saying these factors could further amplify market corrections and financial market volatility.

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