AI boom raises ‘too-big-to-fail’ concerns: Fed

Nifty23, 140.5077.41. Motilal Oswal Midcap Fund Direct-Growth.

Key points

• Top Trending Stocks: SBI Share Cost, Axis Bank Share Rate, HDFC Bank Share Cost, Infosys Share Rate, Wipro Share Cost, NTPC Share Rate.
• By ETMarkets.comLast Updated: Sep 26, 2026, 01: 32: 00 AM IST.
• As on 26 Sep 2026, 01: 10 AM IST.
• Kansas City Federal Reserve President Jeff Schmid has expressed reservations concerning the interconnectedness of the artificial intelligence industry.
• While the US administration and Federal Reserve took extraordinary measures to stabilise financial institutions and credit markets, the crisis intensified in 2008 after the collapse of Lehman Brothers.

Nifty23, 140.5077.41. Motilal Oswal Midcap Fund Direct-Growth. The Economic Times daily newspaper is available online now.

AI boom raises 'too-big-to-fail' reservations as ecosystem expands, states Kansas Fed's Jeff Schmid.

Kansas City Federal Reserve President Jeff Schmid has expressed reservations concerning the interconnectedness of the artificial intelligence industry. He emphasized the need for better understanding of the emerging AI ecosystem and its economic significance. Schmid drew parallels between the AI boom and the financial system before the 2008 crisis. The rapid investment in AI infrastructure raises questions regarding feasible systemic risks. Listen to this article in summarized format. Unlock AI Briefing and Premium Content. New Year Offer 24 Hours Left. Subscribe Now Already a member? Sign In.

Kansas City Federal Reserve President Jeff Schmid has triggered concern regarding whether the rapid expansion of the artificial intelligence industry and data-centre investment could eventually create an ecosystem so interconnected and economically significant that it becomes "too big to fail." Speaking concerning the AI boom, Schmid noted the Federal Reserve needs to better understand the network of businesses, financing arrangements and contracts developing around the technology as investment accelerates. As on 26 Sep 2026, 01: 10 AM IST. S&P 500 Top Gainers. Dell Technologies 565.60 (5.52%). PayPal Holdings 55.34 (5.21%).

Generac Hldgs 208.23 (5.14%). Microchip Technology 78.50 (5.10%). S&P 500 Top Losers. Coterra Energy 32.56 (-8.62%). Gen Digital 21.66 (-6.13%). Charter Communications 112.84 (-4.01%). MGM Resorts International 32.35 (-3.98%).

While the US administration and Federal Reserve took extraordinary measures to stabilise financial institutions and credit markets, the crisis intensified in 2008 after the collapse of Lehman Brothers. The episode demonstrated how institutions considered systemically significant could create significant risks for the wider economy when their difficulties spread through interconnected financial networks. Schmid remarked the question for policymakers is whether a similar dynamic could emerge around AI, particularly as technology businesses, semiconductor firms, cloud providers, data-centre operators, energy firms and financial institutions become increasingly linked through investment and commercial contracts. "You worry a little bit regarding how do we understand what's inside. Is there anything systemic?" he asked. How the AI ecosystem compares with 2008 financial crisis.

Schmid's comments point to a potential policy challenge: understanding whether the concentration of capital, infrastructure and business relationships could create risks that extend beyond individual firms. Before the 2008 crisis, risks were tough to assess as financial institutions were connected through mortgage-backed securities, derivatives, short-term funding and other contractual relationships. Challenges in one part of the system could therefore transmit losses to other institutions. The emerging AI ecosystem's connections are largely based on technology supply chains, capital expenditure, computing capacity, cloud infrastructure, semiconductor supply, power requirements and long-term commercial agreements. Meanwhile, the scale of investment in data centres additionally means that AI development increasingly intersects with real estate, utilities, construction, energy and financing. For the Fed, the challenge is therefore not simply tracking the valuation of AI firms. It is understanding what lies beneath the boom and whether financial or economic linkages are becoming sufficiently concentrated or interconnected to pose systemic risks. Schmid's remarks underscore why the rapid build-out of AI infrastructure is attracting increasing attention from central bankers. As investment grows, policymakers may need greater visibility into the financing structures and contractual relationships supporting the ecosystem to determine whether vulnerabilities are building beneath the technology boom. (Disclaimer: This article is based on inputs from agencies. These do not represent the views of The Economic Times).

AI boomKansas Fed2008 financial crisisJeff SchmidFed on AIAI spendingAI interconnectionsAI supply chainAI risks.

Biogas discovered its ethanol moment this month. Can it now find scale? Gold rates: Caught in a three-way tug-of-war. Nobody's funds? Notably, the fortune Indian families forgot they had.

Forget the UPI fee fight. Do we know how India pays today?

Has the US Fed and AI created a costlier world? And has the queue obtained longer for India?

In short, AI boom raises 'too-big-to is the central thread here, and readers can expect follow-up reporting as the picture becomes clearer.