IMF monitoring AI developments, too early to say if AI reassessment is underway
SPY•The IMF said it is monitoring AI equity valuations and related developments but considers it too early to determine whether investors are reassessing the sector. It said AI investment and elevated energy prices are major contributors to US inflation and that restrictive Fed policy will be needed to return inflation to 2%.
1. AI sector under review
IMF spokesperson Julie Kozack said the fund is closely monitoring volatility in AI equity valuations and potential changes to data center development, but it is too early to tell whether investors are souring on the sector for the long term. She said AI valuations remain exposed to a reassessment of the technology’s longer-term profitability.
2. Inflation and Fed policy
Kozack said increased demand from AI investment and data center construction is one of two major contributors to US inflation, along with elevated energy prices caused by the Iran war and closure of the Strait of Hormuz. The IMF believes the Federal Reserve will need to maintain restrictive monetary policy to bring inflation gradually back to its 2% target.
