EconomyUnited States

Fed officials weigh AI investment as borrowing costs rise

A Federal Reserve official said AI spending is raising the cost of funding housing, and a San Francisco Fed official said AI investment is useful but carries financing risk.

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Schmid, a Federal Reserve official, said the buildout of capital for AI is raising the cost of funding housing. The comment links the spending wave on AI infrastructure to the price of home financing.

Daly, a San Francisco Fed official, said AI is worth investing in but that financing it is not without risk. The remark addressed whether the money used to fund AI carries danger for lenders and borrowers alike.

During a market panel, Maureen O'Connor, the global head of high-grade debt syndicate at Wells Fargo, and Suzanne Gibbons, who leads research as a partner at Davidson Kempner, discussed the higher cost of raising money. Gibbons argued that the greater cost of capital will put pressure on credit.

The panel also discussed how the departure of Nvidia CEO Jensen Huang could shape AI debt financing. The discussion did not give figures for the size of that effect.

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