Federal Reserve Governor Bowman warns of AI investment risks: returns falling short of expectations could trigger a significant stock market pullback.

Fed Vice Chair for Supervision Michelle Bowman warned on November 10 that U.S. equities could face a sharp valuation correction if returns on artificial intelligence investments fall short of expectations, with knock-on effects on consumer spending and financing costs. She flagged the rapid growth of AI-related debt financing—spanning corporate bonds, private credit and project finance—which is projected to exceed $800 billion this year. Bowman also pointed to potential circular financing risks, as large tech firms use off-balance-sheet liabilities to fund smaller companies while investing in AI firms that buy their products. She noted U.S. inflation pressures persist but said the benefits and costs of further monetary tightening need careful weighing, without explicitly backing a December rate hike. Investors will watch AI capital spending plans and credit-market conditions for signs of strain.