AI rockets to top of worries about financial system in latest Fed survey

Rapid growth in artificial intelligence (AI) has become the top concern for financial stability, according to a recent Federal Reserve survey. Eighty-seven percent of respondents cited AI as a significant risk to the financial system, with worries about cyberattacks, complex AI-related financing, and potential market corrections due to AI earnings slowing down.

The Fed's Financial Stability Report highlighted the surge in debt issuance linked to data centers and advanced computing infrastructure, which increased by fivefold from 2023 to reach $680 billion by October 2026. The report noted that this rapid investment in AI infrastructure could lead to a market decline if there's an unexpected downturn in corporate earnings, exacerbated by high levels of leverage among hedge funds.