Federal Reserve Vice Chair Philip Jefferson said on Friday that the current rise in artificial intelligence stocks is unlikely to resemble the dot-com boom and collapse of the late 1990s. He emphasized that today’s AI companies have solid earnings, which sets them apart from the speculative firms of that earlier era.
Speaking at a Cleveland Fed conference, Jefferson explained that AI-related businesses differ from the internet companies that fueled the dot-com bubble. He also noted that the financial system remains “sound and resilient” despite strong investor interest in AI stocks.
Jefferson highlighted that most AI companies have not relied heavily on debt financing. This, he said, “may reduce the extent to which a shift in sentiment toward AI could transmit to the broader economy through credit markets.”
Still, Jefferson acknowledged that debt levels could rise if future AI infrastructure investments expand, as some analysts expect. In that case, “leverage in the AI sector could increase—and so could the losses if sentiment toward AI shifts. I will watch this developing trend closely,” he said.
A recent Federal Reserve report showed that about 30% of respondents view a potential negative shift in confidence toward AI as a major risk to both the U.S. financial system and the global economy.
Jefferson added that artificial intelligence could reshape the world in a dramatic and potentially “bumpy” way. However, he said it is still too early to know how AI will affect the labor market, inflation, or the Federal Reserve’s monetary policy decisions.
