Experts warn Congress: AI investment boom could threaten financial system; witnesses oppose bailouts

During questioning, several senators and experts focused on the financial risks tied to rapid AI investment. Ranking Member Warren and Dr. Sarah Myers West warned that AI firms’ heavy borrowing from private credit and special-purpose vehicles could create systemic vulnerabilities if revenue projections fail to materialize. "AI companies are on a spending spree ... borrowing upwards of a trillion dollars," Ranking Member Warren said, warning that losses could ripple through private credit and banking.

Dr. Sarah Myers West testified that the public could be harmed even if households hold no direct AI equity: bank and pension exposure, job losses and credit freezes could transmit losses broadly. She opposed any bailout of AI firms and urged congressional oversight of industry financing structures and potential subsidies. "I would not support a bailout of the AI industry," Dr. West said when asked directly by senators.

Witnesses suggested alternatives for managing economic exposure: strengthening CHIPS-related investments in domestic semiconductor capacity, improving transparency of private-credit exposures, and using oversight tools to monitor financing structures such as special-purpose vehicles. Senators asked whether taxpayer support should be restricted to grants that build domestic capacity rather than open-ended bailouts; witnesses differentiated infrastructure support from bailouts.

No legislative votes were taken during the hearing. Senators indicated they would pursue oversight and consider policy tools to reduce systemic financial risk from AI-sector funding.