AI tops financial stability concerns in latest Fed survey
AI was cited by 87% of Fed survey respondents, who raised concerns over cyberattacks, complex financing and a potential market decline.
- Artificial intelligence is now the top financial stability concern in a Federal Reserve survey, cited by 87% of respondents, up from 50% in the previous report.
- Key risks identified include a potential market reversal if AI sector earnings disappoint, vulnerabilities from complex "circular financing" arrangements, and the threat of cyberattacks.
- The report highlights the massive scale of investment, noting that debt issuance for advanced computing infrastructure has surpassed $680 billion, with potential future liabilities from financing and leases possibly exceeding $3 trillion.
- High valuations driven by AI enthusiasm are seen as a major vulnerability, with the Fed warning that an earnings shortfall could trigger tighter lending conditions and weaken economic activity.
Artificial intelligence (AI) has become the most frequently cited financial stability concern in a Federal Reserve survey, as respondents highlighted the risks of cyberattacks, increasingly complex financing and a market reversal if the sector’s earnings disappoint.
AI-related risks were identified by 87% of respondents, up from 50% in the survey published in May. The findings appeared in the US central bank’s twice-yearly Financial Stability Report, released on November 13, 2026.
The survey gathered responses from 23 financial-market contacts during September and October. Their concerns covered both the technology itself and the rapid expansion of investment supporting its development.
A broad decline in risky assets was the second most frequently cited concern, mentioned by 52% of respondents. Higher long-term interest rates followed at 48%, while cyberattacks and the sustainability of government debt were each identified by 43%.
Debt issuance exceeds US$680 billion
The report examined how borrowing is financing the construction of data centres and other advanced computing infrastructure.
Debt issuance associated with advanced computing had exceeded US$680 billion by October 2026, about five times the amount issued throughout 2023. Such borrowing accounted for nearly one-third of debt issuance by non-financial companies with investment-grade ratings, compared with less than 6% three years earlier.
The Fed drew comparisons with the broadband telecommunications investment boom of the late 1990s, while noting that the pace of the current investment cycle could soon surpass that earlier period.
The financing extends beyond conventional borrowing. Major technology companies use long-term contracts, leases and guarantees to help smaller third-party developers secure funding for infrastructure projects. Graphics chip designers and hyperscalers, companies operating vast computing infrastructure, also provide equity investment.
The Fed’s data indicated that debt, guarantees and leases yet to begin associated with this infrastructure could exceed US$3 trillion.
Complex financing creates wider exposure
The report described how these interdependent arrangements, often called “circular financing”, could make large technology companies absorb losses in a downturn, limiting the damage transmitted to the wider financial system.
However, the same links could leave those companies with substantially greater exposure than their balance-sheet liabilities suggest.
“The complex interlinkages among firms engaged in the data center buildout, public credit markets, private lenders, and special purpose financing vehicles create vulnerabilities that necessitate close monitoring,” the report stated.
High valuations across several asset classes added to the vulnerability, with enthusiasm for AI partly responsible for elevated prices.
Investment in the sector has made a significant contribution to US economic growth this year. The Fed outlined how an unexpected fall in corporate earnings could trigger lower market prices, tighter lending conditions and reduced investment, weakening economic activity.
High leverage in parts of the financial sector could intensify the impact. Hedge fund leverage, particularly among the largest funds, remained at its highest recorded level since the data series began in 2013.
Survey predates Nvidia turmoil and election results
The September–October survey was completed before Nvidia announced Jensen Huang’s resignation as chief executive on November 12.
His departure followed reports of extramarital affairs, including one involving a Chinese businesswoman suspected of spying for China, according to New York Times reporting cited by Reuters. Reuters separately reported that the US Justice Department had not reached a conclusion on the espionage allegation.
Respondents also gave their views before the results of the US midterm elections, in which growing public concern about AI was a prominent issue.
