Threats from artificial intelligence topped the list for greatest risks to the financial system, far exceeding any other dangers, according to respondents who participated in a Federal Reserve survey released Friday.
The central bank's twice-yearly look at a variety of dangers saw a surge in respondents saying that the biggest danger comes from AI along several fronts including debt, stock market valuations and security risks.
"Respondents noted three distinct areas of concern: (1) elevated equity valuations and the possibility that lower-than-expected earnings could result in lower valuations and a market correction; (2) cybersecurity risk, stemming from either a malicious attack by sophisticated state actors or damage caused by frontier AI models themselves; and (3) risks associated with complex forms of AI-related financing," the report stated.
The report comes with Wall Street on edge over high-flying AI hyperscalers, while communities are on alert for the rapid spread of data centers used to power the technology. Some 56% of voters in this month's midterm elections said data centers were of crucial or major importance in their choices, according to exit polling.
Respondents to the Fed survey released Friday include a variety of market participants, economists, analysts and institutional sources. The report covers the period up to Oct. 28, just a few days shy of the election.