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

Artificial intelligence emerged as the top concern for financial stability in the latest Federal Reserve report, with 87% of surveyed experts citing it as a significant risk, up from 50% in the May survey. The Fed's Financial Stability Report highlighted potential risks stemming from AI itself, rapid investment in the sector, and the possibility of an AI earnings slowdown.

Cyberattacks and higher long-term interest rates were also major concerns, each cited by 43% of respondents. The survey, conducted in September and October, came ahead of recent events like Nvidia CEO Jensen Huang's resignation and the aftermath of the U.S. midterm elections, where AI concerns were prominently raised. The Fed noted that advanced computing-related debt issuance surged to $680 billion by October 2026, a fivefold increase from 2023.

This debt, combined with complex financing arrangements, could create vulnerabilities in the financial system, potentially magnifying losses during a downturn. While AI has driven significant economic growth, an unexpected downturn in corporate earnings could lead to market declines, tighter credit, and reduced investment, impacting the broader economy.