Fed’s Schmid: Need to understand if AI "ecosystem" getting too big to fail

Kansas City Federal Reserve President Jeff Schmid has raised concerns about the artificial intelligence industry potentially becoming a "too-big-to-fail" ecosystem, as reported by Investing.com on Friday.

Schmid emphasized the need for the Fed to evaluate whether the intricate web of firms and contracts within the AI sector is expanding to such a massive scale that it may require government intervention during a crisis. He stressed the importance of understanding the systemic risks within this rapidly growing industry.

Drawing parallels to the 2007-2009 financial crisis, Schmid recalled the government bailouts of major financial institutions due to their outsized influence on the overall economy. He questioned how effectively the central bank can grasp the complexities and potential systemic threats within this emerging AI landscape.