Former Treasury Secretary Rubin Warns of Financial Risks from AI Investments

Former U.S. Treasury Secretary Robert Rubin warned that the expansion of investments in artificial intelligence (AI) could pose significant risks to financial markets and employment. He pointed out the potential for 'circular risks' arising from the entanglement of contracts and debts within the AI ecosystem, which could lead to a chain reaction of shocks. Rubin explained that the overlapping contracts between AI companies and suppliers, along with the structure where suppliers borrow based on contracts with large AI firms, is problematic. He cautioned that failures in fulfilling these contracts could trigger a series of issues related to the associated debts and contracts. This year, the large-scale bond issuance by data center construction and AI software development companies has contributed to rising global borrowing costs, with U.S. 10-year Treasury yields reaching their highest levels since 2002. Rubin opposed the claim that AI would solve America's fiscal problems, warning that improvements in productivity from AI could lead to significant job losses. He particularly noted that knowledge workers are likely to be heavily impacted and pointed out the lack of systems to support their job transitions. He also assessed the profitability of AI investments as uncertain, stating that while some companies may succeed, a significant number are likely to underperform.

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