BIS: Over half of AI investment is AI-to-AI

Circular Capital Flows in AI

A significant proportion of investment activity in the artificial intelligence (AI) sector involves firms investing in other AI companies. Analysis by the Bank for International Settlements (BIS), published on 01 October 2026, reveals that from 2021 to 2025, 28.7% of all AI firms’ investment deals, measured by deal value, targeted another AI entity.

Furthermore, during the same five-year period, 55.2% of the total incoming capital received by AI firms originated from within the AI sector itself. This pattern suggests a high degree of interconnectedness in the financing landscape for AI development and expansion globally.

Supply Chain Linkages Drive Some Investments

The BIS analysis further details that a notable portion of these intra-sector investments are linked to commercial supply chain relationships. Between 2021 and 2025, 16.1% of all AI-to-AI investment deals, when counted individually, also featured an existing commercial supply chain connection between the investor and the target firm.

When assessed by deal value, this proportion rose to 46.4%. The BIS notes that such circular investment relationships often reflect economic drivers such as the need for firms to secure critical inputs for their operations or the presence of information asymmetries, where insider knowledge may guide investment decisions.

Risks of Opacity and Macroeconomic Impact

While these investment patterns may address specific commercial needs, the BIS cautions that they also introduce potential macroeconomic risks and can increase market opacity. The concentration of capital flows within a single sector, particularly when intertwined with supply chain dependencies, might amplify systemic vulnerabilities.

Should a significant disruption affect a key player, the ripple effects could extend broadly across the interconnected network of AI firms.

Policymakers and regulators may need to consider how to balance the benefits of strategic intra-sector investment against the potential for increased risk and reduced transparency in capital markets, according to the BIS bulletin published on 01 October 2026.

Implications for Asian Technology Markets

The global trends identified by the BIS, published on 01 October 2026, carry implications for Asia’s expanding technology markets. While the study does not offer regional breakdowns, economies such as South Korea, Singapore, and China are witnessing substantial domestic investment in AI capabilities.

Decision-makers in these Asian markets will need to evaluate how a high degree of intra-sector investment could influence market concentration and systemic risk within their national AI ecosystems, especially given the prevalence of public-private partnerships in national AI strategies.

Monitoring the transparency of capital flows and assessing potential information asymmetries in local AI investment landscapes will be crucial. Industry reports or regulatory data from major Asian tech hubs in Q1 2027 could provide more granular insights into these specific regional dynamics.