Catenaa, Friday, November 21, 2025- US Federal Reserve Vice Chair Philip Jefferson said he believes the current surge in stocks related to AI is unlikely to be a replay of the late 1990s dot-com stock boom that ended in a bust.
A recent Fed report showed that some 30% of respondents felt that a turn in sentiment against AI is a salient risk to the US financial system and the global economy.
Jefferson noted that investor enthusiasm for AI firms comes against a backdrop of a financial system that is “sound and resilient.”
Also different from the speculative dot-com boom, he said in remarks prepared for delivery to a Cleveland Fed conference, is that AI firms have not so far relied heavily on debt financing.
Limited use of leverage “may reduce the extent to which a shift in sentiment toward AI could transmit to the broader economy through credit markets,” Jefferson said.
If future investments in AI infrastructure require more debt, as some analysts forecast, “leverage in the AI sector could increase—and so could the losses if sentiment toward AI shifts. I will watch this developing trend closely.”
Jefferson added that artificial intelligence may transform the world in a dramatic and “bumpy” way, though it is too early to tell exactly what consequences for the labor market, inflation, and monetary policy.
The S&P 500 has lost by 2.5% since October 21, with investor concerns around the huge chunks of spending by major tech companies on data centers and AI; however, the index is up by over 11% so far this year.
