Singapore's central bank has issued a stark warning that a cooling of the global artificial intelligence frenzy could deal a severe blow to the world economy.

It also cautioned that the rapid evolution of AI models and quantum computing creates serious cybersecurity vulnerabilities for financial institutions. The Monetary Authority of Singapore (MAS), which also serves as the country's financial regulator, stated that global economic growth, investment, and financial market performance are now heavily dependent on the semiconductor and data center industries. A slowdown in this sector would have far-reaching consequences.

MAS Managing Director Chia Der Jiun warned, "If there is a major contraction in AI investment, a decline in corporate investment, weakening demand for semiconductors, coupled with negative wealth effects, global economic growth will come under significant pressure." He added, "Global financial conditions could tighten sharply."

These warnings come amid growing concern about the sustainability of the AI boom, which saw shares of Asia's leading chip companies plunge on Tuesday. In the first half of the year, investor bets that massive AI spending would make chip and memory stocks the biggest beneficiaries drove global stock markets higher. However, in recent weeks, these stocks have become the primary target of selling pressure.

Speaking at the MAS annual report release event on Tuesday, Chia noted that even if large-scale AI investment proves successful and broadly boosts productivity, it could also stoke inflation and increase energy demand. In the short term, the MAS expects AI investment to continue to support the global economy. "The longer-term outlook remains to be seen," Chia said. "If market expectations prove to be off the mark, the situation could turn very quickly... There is tremendous uncertainty here."

Despite disruptions from the Middle East conflict, the MAS reported that Singapore's highly trade-dependent economy showed resilience in the first half of the year. The economy grew 6% year-on-year in the first six months of 2026, up from the 5% growth rate recorded in the second half of 2025. While output in some energy-related industries, such as chemicals manufacturing, fell by more than 10%, a significant surge in the technology sector offset these drags.

The regulator pointed out that Asia's reliance on global tech investment is rising. Over 70% of export growth this year has been driven by AI-related electronics, compared to just 46% in 2024. The MAS also emphasized that cybercriminals are increasingly using artificial intelligence, and with the future proliferation of quantum computing, the cyber threats facing financial institutions are continuously rising.

Chia said malicious actors are using AI to craft more sophisticated phishing attacks and deepfake content, making scams more deceptive. Meanwhile, hackers are using advanced AI models to probe and exploit vulnerabilities in financial systems. He argued that banks and investment firms must also use similar technology to strengthen their own defenses.

The Monetary Authority of Singapore has announced the formation of a special task force to help financial institutions bolster their capabilities to defend against cyber threats and AI-related risks. MAS Chief Technology Officer Vincent Loy stated, "Frontier AI is amplifying the destructive power, attack scale, and technical complexity of cyber threats. The financial industry must act quickly and cooperate deeply."