Most Top Fed Officials Fear AI Boom Lifts Prices; Warsh Sees Upside
Federal Reserve Chairman Kevin Warsh will host a three-hour public forum on artificial intelligence in San Francisco on Monday. Most top Fed officials worry the data center buildout is pushing prices up, even as Warsh calls AI a hinge point in history.
Federal Reserve Chairman Kevin Warsh will lead a three-hour public forum on artificial intelligence in San Francisco on Monday, as most top Fed officials worry that the AI buildout is pushing prices higher. Warsh, by contrast, calls AI a "hinge point in history."
The forum is the only scheduled public event of the five task forces Warsh set up early in his tenure this year to review issues of major importance to the Fed. The San Francisco Fed's agenda lists three panels, bookended by comments from Warsh. It promises "input from a wide range of stakeholders on technology's implications for the economy and the labor market."
A hopeful chair, wary colleagues
Warsh is hosting the discussion at a awkward moment. AI could in theory lower prices over time. But the frenetic construction of data centers is having the opposite effect now, driving up prices in a way that increasingly concerns many Fed officials.
There is no clarity on when that pressure may let up. The central bank may even need to slow the very thing Warsh sees as revolutionary.
Fed officials began focusing on AI even before Warsh took the helm. Research and discussion picked up pace after the release of ChatGPT.
Backlash after the midterms
Last week's midterm elections sparked a backlash against rapid data center construction. They also raised the specter of deepening inequality.
The objections are driven by local politics but range widely. They include local land use, the impact on children's and societal mental health, and possible stress in financial markets as capital flows through increasingly complex AI funding vehicles. The most recent worry is national security, after revelations about a top tech industry executive's relationship with an alleged Chinese spy.
Oakland Mayor Barbara Lee has joined a movement to ban local data center construction that has taken root just across San Francisco Bay. "We have to make sure that AI is used responsibly and ethically," she said recently.
A homecoming for the chair
The event takes Warsh to the heart of the industry. He attended nearby Stanford University with some of the tech industry's leading figures. He appointed one of them, Marc Andreessen, to chair the task force focused on AI, which Warsh has come to call "super intelligence" in line with President Donald Trump's wishes.
Other members of the productivity and jobs task force include Chad Jones, a Stanford University economics professor now working with the internal think tank of AI firm Anthropic. Anthropic is on the verge of an initial public offering that would value the company at more than $1 trillion. Asha Sharma, who runs Microsoft's Xbox business, also serves on the task force.
Warsh was himself an investor in AI firms while auditioning for the Fed job. He sold his holdings under Fed ethics rules.
