Fed Flags AI as Top Cited Risk; Off-Balance-Sheet Data Center Obligations Outgrow Debt
The Federal Reserve's November Financial Stability Report, released November 13, says AI was the risk most often cited by the 23 market contacts in its fall survey; Reuters puts the share at 87%, up from 50% in May. The Fed estimates advanced-computing debt issuance at more than $680 billion by October 2026, about five times 2023, and outstanding public debt at more than $1.1 trillion. Not-yet-commenced leases exceed $1 trillion and guarantees and contract commitments exceed $2 trillion, both undiscounted, so big tech's exposure to a downturn may be substantially larger than its balance sheets show. The largest US banks have close to $1 trillion of related exposure.
The Federal Reserve's main worry about the AI build-out is not the debt it can count but the obligations that never reach a balance sheet. Its November Financial Stability Report, released on November 13, puts advanced-computing debt issuance at more than $680 billion this year, and then says the leases, guarantees and contract commitments around that debt have grown "even more rapidly."
What the Fed found#
Debt issuance to finance advanced computing reached more than $680 billion by October 2026, about five times the $130 billion issued in all of 2023, the Fed says. Such borrowing rose from under 6% of nonfinancial investment-grade corporate issuance in 2023 to about 31% in 2026, and outstanding public debt tied to advanced computing is estimated at more than $1.1 trillion. Private-credit deals make the true total harder to measure, the report adds.
The larger numbers sit off the balance sheet. Not-yet-commenced leases have undiscounted values above $1 trillion, and take-or-pay contracts, residual value guarantees and other obligations exceed $2 trillion, in an analysis covering Amazon, Alphabet, Broadcom, Meta, Microsoft, Nvidia and Oracle. The Fed describes how the plumbing works: hyperscalers sign long leases that developers use to borrow, and GPU makers "often provide a guaranteed residual value of the GPU collateral" to support chip purchases by AI firms. Combined with equity stakes, that creates what the Fed calls a "circular financing" dynamic. Reuters, adding the categories together, reported that debt, guarantees and unstarted leases could exceed $3 trillion.
The Fed's reading cuts both ways. The biggest firms may absorb losses in a downturn, shielding the rest of the system, but "these firms' economic exposure to such a downturn may be substantially larger than suggested by their on-balance-sheet liabilities." The riskier slices of these financings sit with high-yield funds, life insurers, business development companies and private debt vehicles, and the largest US bank holding companies have close to $1 trillion of exposure to tech firms, data-center developers, related special purpose entities and utilities, which the annual stress test evaluates. Comparing five hyperscalers with the late-1990s broadband build-out, the Fed says the pace of the current cycle's investment "may surpass that of the 1990s telecom cycle relatively soon."
The survey#
AI topped the list of shocks cited by the New York Fed's market contacts, ahead of a risk-asset correction and higher long-term rates. Respondents named three concerns: stretched valuations and a correction if earnings disappoint, cyber risk from state actors "or damage caused by frontier AI models themselves," and complex AI financing. Reuters reported that 87% of contacts cited AI, against 50% in May. The survey ran in September and October, before Jensen Huang resigned as Nvidia's chief executive and before the midterm results, Reuters noted. Lenders were already pulling back: banks and credit investors told Reuters this month they were wary of more AI debt.
Limits#
- The survey covers 23 contacts, so the 87% share is roughly 20 people; the percentage is Reuters' reading of the Fed's chart.
- The Fed says the lease, guarantee and commitment figures are undiscounted and "not directly comparable" with on-balance-sheet debt, which is discounted. The $3 trillion total adds them together and is Reuters' framing, not a Fed headline number.
- The debt estimate excludes some private placements, and the Fed itself says the full amount of private-credit borrowing is hard to measure.