U.S. Sen. Elizabeth Warren (D-MA) led a group of senators in urging Treasury Secretary Scott Bessent, the chair of the Financial Stability Oversight Council (FSOC), to launch an investigation into the financial stability risks posed by artificial intelligence (AI).
Specifically, Warren, the ranking member of the Senate Banking, Housing, and Urban Affairs Committee, took issue with the more than $1 trillion in debt projected to be poured into artificial intelligence (AI) infrastructure buildouts.
“Big Tech and other artificial intelligence (AI) companies are on pace to spend trillions of dollars in the coming years on chips, servers, and other data center infrastructure needed to power AI services,” wrote Warren and the group of Democratic senators in the letter to Bessent. “While most of these companies have historically funded AI investments using their own profits or equity offerings, they are increasingly turning to complex and opaque debt markets to borrow staggering sums of cash.”
The letter was also signed by Sens. Richard Blumenthal (D-CT), Tina Smith (D-MN), and Chris Van Hollen (D-MD).
“The sheer magnitude of investment appears to drastically exceed realistic assumptions of business and consumer demand for AI products and services in the near-term. AI companies unable to rapidly increase revenues and service their massive debt loads could cause destabilizing losses for an interconnected set of financial institutions, triggering a broader financial crisis that harms the economy,” they added in the letter.
The senators also highlighted early signs of stress in AI-related debt markets, risks of contagion across interconnected firms, and the potential for sharp market corrections that could harm retirement savers, state and local economies, and households far removed from the AI sector.
In addition, they raised concerns that AI executives are already laying the groundwork for a taxpayer-funded bailout if the AI bubble bursts.
“(S)ome AI companies are trying to get ahead of a potential financial crash by preemptively advocating for an AI bailout if the bubble bursts. OpenAI has been publicly pushing the federal government to ‘lean in’ and assist the industry by ‘de-risking’ AI expansion, including by expanding federal tax incentives and loan guarantees for AI companies,” they stated in the letter.
The lawmakers urge FSOC to work with the Treasury Department’s Office of Financial Research to compel data from financial institutions exposed to AI-related debt and to use its authorities to address any risks identified.
FSOC was established after the 2008 financial crisis to identify and respond to emerging threats to financial stability.