AI is now Wall Street's top financial stability worry, Fed survey finds
The Federal Reserve said 87% of market contacts named artificial intelligence as a salient risk to financial stability, up from 50% in May, as AI-linked debt passed $680 billion.
From third place to first in six months
Artificial intelligence is now the risk Wall Street worries about most, according to the Federal Reserve. In its Financial Stability Report, released on Friday, the central bank said 87% of the market contacts surveyed by the Federal Reserve Bank of New York in September and October named AI as a salient risk to the financial system, up from 50% in the spring survey.
Respondents named three distinct worries: elevated equity valuations that could fall if earnings disappoint, cybersecurity risk from sophisticated state actors or from frontier AI models themselves, and risks in complex forms of AI-related financing. The survey drew responses from 23 contacts at broker-dealers, banks, investment funds and advisory firms, and the report stresses that the answers are the respondents' views, not those of the Federal Reserve Board or the New York Fed. The survey closed before Nvidia chief executive Jensen Huang resigned on November 12, and the report reflects information available as of October 28.
The debt behind the buildout
The report also puts hard numbers on the borrowing behind the data center boom. Debt issued to finance advanced computing infrastructure rose to more than $680 billion by October 2026, about five times the $130 billion issued in all of 2023, and its share of nonfinancial investment-grade corporate debt issuance climbed from less than 6% in 2023 to about 31% in 2026.
Outstanding public debt tied to advanced computing is estimated at more than $1.1 trillion as of October 2026. Other obligations have grown faster still: leases not yet started exceed $1 trillion, and take-or-pay contracts and residual value pledges exceed $2 trillion. Large technology firms often support the financing of smaller, riskier firms through leases, backstops and equity investments, creating what the Fed calls a circular financing dynamic. The largest U.S. bank holding companies have close to $1 trillion of exposure to large technology firms, data center developers and related financing vehicles, exposure the Fed evaluates in its annual stress test.
What else the survey flagged
AI was not the only worry. A correction in risk assets was cited by 52% of contacts, higher long-term rates by 48%, and cyberattacks and fiscal debt sustainability by 43% each. Respondents saw cyberattacks and fiscal sustainability as carrying the most severe potential consequences, and they warned that stretched valuations, circular financing and heavy reliance on debt could amplify losses if AI earnings disappoint.
The report's broader assessment was mixed. Hedge fund leverage reached its highest level since 2013 and stayed concentrated in the largest funds, the forward price-to-earnings ratio of equities remained well above its historical median, and Treasury yields rose markedly, with term premiums climbing above the median level. The International Monetary Fund raised similar alarms about AI-linked market risks in its October report. The Fed's survey is a snapshot of sentiment among 23 market contacts, not a forecast of a crisis.
- 87%Contacts citing AI as a salient risk
- 50%Share citing AI in the spring survey
- $680 billionAdvanced computing debt issued by October 2026
- 31%Share of investment-grade issuance in 2026
- $1.1 trillionOutstanding public debt tied to advanced computing
