Furious pace of AI investment on some Fed officials' radar now

“I don't see this as a bubble kind of situation,” Federal Reserve Bank of New York President John Williams said in an interview with Reuters conducted on Friday.

“What we're seeing is a very high level of excitement, enthusiasm around new technology, around AI,” Williams said. “Investors are trying in real time to solve an almost intractable problem, and that is how big are the benefits of AI going to prove to be,” and trying to answer these questions will lead to volatility.

Williams said that while there’s been an increase in borrowing to support the AI investment it is being managed by companies with high earnings, noting, “I'm not as worried about the financial stability from the leverage right now.”

Torsten Slok, chief economist at money manager Apollo, said in a research note, "The data-center buildout is still less than half the size of the housing boom, which peaked at 6.6% of GDP in 2005," while at the same time the investment pace relative to GDP has been growing faster than housing did in the run up to the global financial crisis.