US Fed’s Philip Jefferson: AI-related stock gains unlikely to be a repeat of the dot-com boom

Federal Reserve Vice Chairman Philip Jefferson said Friday that he believes the current stock market surge linked to artificial intelligence is unlikely to be a repeat of the dot-com stock boom of the late 1990s, which ended in bust, largely because AI-related companies are well established and making real profits.A recent Fed report shows that about 30% of respondents believe that a change in sentiment against AI is a notable risk to the US financial system and the global economy.

Jefferson noted that investor enthusiasm for AI companies comes against the backdrop of a financial system that is “healthy and resilient.”

What also differs from the speculative dot-com boom, he said in remarks to a Cleveland Fed conference, is that AI companies have not relied heavily on debt financing until now.

Limited use of leverage “may reduce the extent to which a shift in sentiment toward AI can be transmitted through the credit markets to the broader economy,” Jefferson said.

If future investments in AI infrastructure require more debt, as some analysts predict, “influence in the AI ​​sector could increase – and so could losses as sentiment toward AI shifts. I will keep a close eye on this developing trend.” Jefferson added that artificial intelligence could change the world in dramatic and “bumpy” ways, although it is too early to say exactly how this will impact the labor market, inflation and monetary policy.