What if the Bond Market Slows AI Even without the Fed?
\n\nIn a newsletter published Tuesday, the Wall Street Journal‘s Greg Ip argues that investors who believe AI is immune to monetary tightening are kidding themselves. The Fed doesn’t have to make artificial intelligence unprofitable to stop the investment boom. All it would need to do is tighten financial conditions enough to make financing the boom unsustainable.
\n\nIp is surely right about the vulnerability of the AI boom to higher interest rates and tighter financial conditions. But there’s no reason those conditions have to be imposed by the Fed. Capital markets can tighten financial conditions all on their own. Indeed, long-term interest rates have already been rising, and Federal Reserve Chairman Kevin Warsh thinks the AI investment boom itself is partly responsible.
\n\nAt his September 16 press conference, Warsh was asked why long-term Treasury yields were climbing. He pointed to stronger economic growth and competition for capital from the technology giants building AI infrastructure.
\n\n“The so-called hyperscalers are out in the market raising funding,” Warsh explained. “And so the competition for capital is real.”
\n\nFed Governor Christopher Waller made a similar argument at a Bloomberg event in New Delhi last…
Original source: https://www.breitbart.com/economy/
