Photo: Federal Reserve, public domain, via Wikimedia Commons.
Artificial intelligence has overtaken every other worry on Wall Street. In the Federal Reserve's latest Financial Stability Report, released on Friday, November 13, AI surged to become the most-cited risk to the US financial system — named by 87% of the market contacts the central bank surveyed, up from just 50% in the spring.
The finding lands at a moment when AI stocks are already under heavy pressure. Chip shares sold off sharply on Friday, the Philadelphia Semiconductor Index fell 3.4%, and the S&P 500 ended a turbulent week lower — a reminder that the market's trillion-dollar bet on artificial intelligence can move fast in both directions.
A Sharp Jump in Concern
The Fed's twice-yearly report is built around a survey of market participants conducted by staff at the Federal Reserve Bank of New York in September and October. This time, 23 contacts at broker-dealers, banks, investment funds and advisory firms were asked what they see as the biggest threats to US financial stability. AI topped the list by a wide margin.
The next most-cited risks were a sharp correction in risk assets, named by 52% of respondents, and higher long-term interest rates, cited by 48%. A year ago, in the fall 2025 survey, only about 30% of contacts had flagged AI as a salient risk. The jump to 87% is one of the largest swings the survey has recorded.
The Fed stresses that the answers reflect the views of the people it polled, not the central bank's own judgment. Even so, the report's authors chose to highlight the result prominently — a signal that officials are watching the AI boom closely.
Three Ways AI Could Shake Markets
Respondents pointed to three distinct dangers bundled under the AI heading. The first is valuation: shares of AI companies have climbed so far, so fast, that an earnings disappointment could trigger a broad market correction. The second is cyber risk, including attacks by state actors and damage caused by frontier AI models themselves. The third is the financing behind the boom — increasingly complex forms of AI-related borrowing that could unravel if the sector stumbles.
The numbers behind that borrowing are striking. Debt issuance tied to advanced computing — data centers and related infrastructure — reached $680 billion by October 2026, about five times the $130 billion issued in all of 2023, according to the report. The Fed also noted that hedge fund leverage has climbed to its highest level since 2013.
Importantly, the survey was conducted before the latest turmoil at chipmaker Nvidia, where chief executive Jensen Huang stepped down on Thursday after revelations about extramarital affairs, including one involving a Chinese businesswoman reported to be under suspicion as a Chinese spy. That means the 87% figure may already understate current anxiety.
Markets Already on Edge
The report arrived on a nervous day for investors. US stocks closed lower on Friday as a pullback in big AI-focused companies weighed on the market, though the S&P 500 still managed a 2.5% gain for the week — its first winning week since October. The yield on the 10-year Treasury rose to 5.15%, its highest in months, as traders priced in another Federal Reserve interest-rate hike in December.
Fed Vice Chair Philip Jefferson said on Friday that with the economy growing and the labor market stable, inflation will decide the central bank's next move — a message that reinforced expectations of a December hike after hot October inflation data. Producer prices rose 6.5% from a year earlier, the fastest since November 2022.
For now, the Fed's overall assessment remains measured: the report still describes the financial system as fairly stable. But the message from the market contacts it polls is unmistakable — the same technology driving this year's market rally is now seen as the biggest threat to it.
What the Fed Is — and Isn't — Saying
The Financial Stability Report is not a forecast, and it does not predict a crisis. It is a snapshot of vulnerabilities, and its most notable vulnerability this time is not a war, a recession or a debt ceiling fight. It is the speed and scale of the AI buildout itself — the valuations, the borrowing and the concentration of market gains in a handful of companies.
The next edition of the report, due in about six months, will show whether that concern keeps climbing — or whether the market's AI worries ease as earnings catch up with expectations.
Sources: Reuters; Federal Reserve Financial Stability Report, November 2026.