The Federal Reserve's latest financial stability report ranks artificial intelligence as the top threat to the US financial system, according to a survey of market contacts released Friday.
Of the 23 market contacts polled by the New York Fed in its twice-yearly survey, 87% named AI as a salient risk. This represents a significant increase from 50% in the spring 2026 survey.
Key Areas of Concern
Respondents identified three distinct areas of concern related to artificial intelligence:
- Elevated equity valuations and the possibility that lower-than-expected earnings could trigger market corrections
- Cybersecurity risks from sophisticated state actors and potential damage caused by frontier AI models
- Complex forms of AI-related financing
Wall Street remains focused on high-flying AI hyperscalers, while communities monitor the rapid expansion of data centers supporting the technology. Exit polling showed 56% of voters in this month's midterm elections rated data centers as crucial or major factors in their voting decisions.
Other Leading Risks
AI led by a substantial margin. Other significant risks cited by respondents included:
- Risk asset correction at 52%
- Higher long-term rates at 48%
- Cyberattacks at 43%
- Fiscal debt sustainability at 43%
The fiscal concerns reflect current conditions, with US debt above $40 trillion and the budget deficit near $2 trillion.
Additional Findings
The Fed report found the financial system generally stable overall. However, hedge fund leverage reached its highest level since 2013, concentrated among a relatively small group of funds. The stablecoin market cap remained relatively flat near $310 billion.
