Warren, Colleagues Press FSOC to Launch Probe into Financial Stability Risks of AI Debt Bubble

Lawmakers warn opaque and risky AI financing could fuel next financial crisis if regulators fail to act

"AI companies unable to rapidly increase revenues and service their massive debt loads could cause destabilizing losses for an interconnected set of financial institutions, triggering a broader financial crisis that harms the economy"

Text of Letter (PDF)

Washington, D.C. - U.S. Senator Elizabeth Warren (D-Mass.), Ranking Member of the Senate Banking, Housing, and Urban Affairs Committee, led a group of her colleagues in pressing Scott Bessent, Chair of the Financial Stability Oversight Council (FSOC), to launch a formal investigation into growing financial stability risks posed by the more than $1 trillion in debt projected to be poured into artificial intelligence (AI) infrastructure buildouts. Other signers of the letter include Senators Richard Blumenthal (D-CT), Tina Smith (D-MN), and Chris Van Hollen (D-MD).

FSOC was established after the 2008 financial crisis to identify and respond to emerging threats to financial stability. The Senators warn that AI and Big Tech companies are increasingly relying on complex and opaque debt-including private credit, securitizations, and off-balance-sheet financing-to fund massive data center buildouts that far exceed near-term demand and revenue growth. The lawmakers caution that these practices obscure true leverage and expose banks, insurers, private credit funds, REITs, pensions, and retail investors to significant losses.

"Big Tech and other artificial intelligence (AI) companies are on pace to spend trillions of dollars in the coming years on chips, servers, and other data center infrastructure needed to power AI services," wrote the Democratic Senators. "While most of these companies have historically funded AI investments using their own profits or equity offerings, they are increasingly turning to complex and opaque debt markets to borrow staggering sums of cash."

They continued: The sheer magnitude of investment appears to drastically exceed realistic assumptions of business and consumer demand for AI products and services in the near-term. AI companies unable to rapidly increase revenues and service their massive debt loads could cause destabilizing losses for an interconnected set of financial institutions, triggering a broader financial crisis that harms the economy."

In the letter, the Senators highlight early signs of stress in AI-related debt markets, risks of contagion across interconnected firms, and the potential for sharp market corrections that could harm retirement savers, state and local economies, and households far removed from the AI sector.

They also raised concerns that AI executives are already laying the groundwork for a taxpayer-funded bailout if the AI bubble bursts: "(S)ome AI companies are trying to get ahead of a potential financial crash by preemptively advocating for an AI bailout if the bubble bursts. OpenAI has been publicly pushing the federal government to 'lean in' and assist the industry by 'de-risking' AI expansion, including by expanding federal tax incentives and loan guarantees for AI companies."

Citing warnings from the Federal Reserve, global regulators, and FSOC itself, the lawmakers urge FSOC to work with the Treasury Department's Office of Financial Research to compel data from financial institutions exposed to AI-related debt and to use its authorities to address any risks identified. The senators requested written confirmation by February 13, 2026.

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