AI tops the risks to US financial stability in Federal Reserve survey of market contacts

AI was the most frequently cited risk to US financial stability in a survey of market contacts published in the Federal Reserve's November Financial Stability Report on November 13. Staff at the Federal Reserve Bank of New York collected the views of 23 contacts at broker-dealers, banks, investment funds and advisory firms in September and October. Mentions of AI, higher long-term interest rates and cyberattacks rose the most compared with the spring survey.

Respondents named three areas of concern. The first is a sharp correction in AI-related stocks, driven by uncertain returns on large capital spending; many said stretched valuations, circular financing arrangements and heavy reliance on debt to fund the AI buildout could amplify losses and spill over into business investment and household consumption. The second is cybersecurity, from attacks by sophisticated state actors or damage caused by frontier AI models themselves, as advances in AI lower the barrier to sophisticated attacks. The third is complex forms of AI-related financing.

Cyberattacks and fiscal debt sustainability were seen as the risks with the most severe potential consequences. The report says the survey summarises respondents' views and does not represent the views of the Federal Reserve Board or the New York Fed.