Fed’s Schmid questions if AI ecosystem is "too-big-to-fail"

Investing.com -- Kansas City Federal Reserve President Jeff Schmid said Friday that the central bank needs to assess whether the artificial intelligence industry is growing into a too-big-to-fail ecosystem.

Schmid said the Fed must understand if the network of firms and contracts developing in the AI sector is becoming so large that it could require government intervention in a crisis.

"Where we have to start to really synthesize what's happening in the AI and the data center build-out is are we moving to a too-big-to-fail AI ecosystem," Schmid said. He referenced the public bailouts of major financial institutions during the 2007 to 2009 financial crisis, when their size and influence on the broader economy necessitated government support.

"You worry a little bit about how do we understand what's inside. ... Is there anything systemic?" he asked.

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