Fed officials assess AI investment risks

United States — Federal Reserve officials are increasingly scrutinizing the rapid buildout of artificial intelligence infrastructure, assessing whether the surge in investment, rising leverage, and complex financing structures could pose risks to the financial system. While some officials, such as United States — Federal Reserve Bank of New York President John Williams, downplay the risk of a bubble, others, including Kansas City Fed President Jeff Schmid, express concerns about the industry becoming 'too big to fail' and the potential for financial contagion. San Francisco Fed chief Mary Daly acknowledges the growth rate is 'very worrisome' but notes that many commitments are still announcements, reducing the risk of stranded assets. The debate comes amid comparisons to the housing boom and dot-com era, with Apollo chief economist Torsten Slok noting the data-center buildout is still less than half the size of the housing boom relative to GDP. The Fed is focused on monitoring potential vulnerabilities and building a dashboard to identify what could go wrong.