Artificial intelligence has overtaken every other worry on Wall Street’s list of threats to the financial system, according to the Federal Reserve’s latest Financial Stability Report, published on Friday.
Eighty-seven per cent of the market contacts surveyed by the New York Fed named AI as a salient risk to financial stability over the next 12 to 18 months, up from 50 per cent in the spring survey and 30 per cent a year ago. Respondents pointed to three main dangers: cyberattacks, the complex financing behind the AI buildout, and the possibility that an earnings slowdown could trigger a broad market correction.
The next most-cited worries carried heavy AI implications of their own. A broad correction in risk assets was named by 52 per cent of respondents, higher long-term interest rates by 48 per cent, and cyberattacks and the sustainability of US government debt by 43 per cent each.
The survey was conducted in September and October, so respondents were polled before the latest turmoil at Nvidia, where chief executive Jensen Huang stepped down on Thursday, and before the midterm elections in which public concern about AI was a central issue.
The report itself devoted substantial space to the debt funding the AI boom. Borrowing tied to data centres and other advanced computing infrastructure reached $680 billion by October 2026 — about five times the $130 billion issued in all of 2023 — and now accounts for nearly a third of all nonfinancial investment-grade corporate debt issuance, up from less than 6 per cent three years ago.
The Fed drew a parallel with the broadband telecom investment cycle of the late 1990s, while noting that the current cycle could soon surpass it. It also examined the tangled financing arrangements behind the buildout: long-term contracts, leases and guarantees let the largest technology firms support borrowing by smaller third parties, while chip designers and hyperscalers often contribute equity as well. Debt, guarantees and not-yet-commenced leases on such infrastructure could exceed $3 trillion, the Fed found.
That “circular financing” could cushion the system in a downturn, the report said, since the biggest firms could absorb losses. But it could also mean their exposure to a downturn is “substantially larger” than their on-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.
Asset valuations across a range of classes remain high, the Fed found, due in part to investor enthusiasm about AI. Investment in the sector has been a significant driver of US economic growth this year, and an unexpected downturn in corporate earnings could prompt a market decline, tighter credit and reduced investment. Such a downturn could be made worse by leverage in parts of the financial sector: the Fed noted that leverage among hedge funds, particularly the largest firms, remains at the highest levels since it began gathering such data in 2013.
Sources: Reuters, “AI rockets to top of worries about financial system in latest Fed survey” by Pete Schroeder, 13 November 2026 (https://wixx.com/2026/11/13/ai-rockets-to-top-of-worries-about-financial-system-in-latest-fed-survey/); Federal Reserve, Financial Stability Report, November 2026.
