A Federal Reserve survey released Friday found that artificial intelligence poses the biggest threat to the financial system, far exceeding other dangers. Eighty-seven percent of respondents cited AI as a "salient risk" to the system, up from 50% in the spring survey.
The central bank identified three distinct areas of AI concern. First, elevated equity valuations and the risk that lower-than-expected earnings could trigger a market correction. Second, cybersecurity risks from sophisticated state actors or damage caused by frontier AI models themselves. Third, risks tied to complex forms of AI-related financing.
The survey included market participants, economists, analysts and institutional sources and covered the period through Oct. 28. The next most-cited danger was risk asset correction, mentioned by 52% of respondents. Higher long-term rates (48%), cyberattacks (43%), and fiscal debt sustainability (43%) followed.
The report noted that the financial system otherwise appeared fairly stable. Hedge fund leverage reached its highest level since 2013 and concentrates on a relatively small group.