Federal Reserve Vice Chair for Supervision Michelle Bowman believes that the stock market could be at risk if investments in AI lead to poor returns.
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“I am concerned that disappointing news on AI investment returns could lead to a sharp correction in equity prices, but the economy continues to show elevated productivity growth likely due, in part, to increased adoption of AI technologies,” Bowman said in prepared remarks on Friday for an economic forum in Foxborough, Massachusetts.
Bowman Sees AI Driving Economic Growth amid ‘Stretched’ Valuations
Bowman added that the economy has been uplifted by rising equity prices and AI investments. While stock valuations “may appear stretched,” she points out that AI-related companies have posted strong earnings growth and have largely self-financed their investments in innovation.
AI may have contributed to the economy’s higher productivity, which supported Bowman’s stance to cut rates last year. Looking ahead, she noted that additional cuts to a more neutral level are justified due to a softening labor market.
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