Federal Reserve Chair Jerome Powell said Wednesday he did not believe the massive growth in artificial intelligence (AI) investment and spending was a bubble.
At a press conference following the Fed's latest rate cut, Powell contrasted the explosive growth of AI companies with the dot-com bubble of the 2000s.
"This is different," Powell said, explaining that leading AI companies actually have a track record to show for their sky-high valuations, unlike the scores of firms that went bust during the start of the century.
"These [AI] companies, the companies that are so highly valued, actually have earnings and stuff like that," Powell said.
While the defunct giants of the dot-com bubble were "ideas rather than companies," Powell said, the leading companies in AI are building out actual infrastructure through data centers and tech development.
"The investment we're getting in equipment and all those things go into creating data centers and feeding the AI, it's clearly one of the big sources of growth in the economy," Powell said.
A growing number of influential tech and financial figures, including leading AI executives, have warned of a potential bubble within the AI industry after years of exponential growth. Investment in AI has been one of the few bright spots in the U.S. economy, particularly as President Trump's tariffs stifle growth in other areas of the economy.
Policymakers have also become increasingly concerned with the potential impact AI could have on the job market, particularly after a string of major companies announced plans to cut staff, driven partly by developments in the technology.
"You see a significant number of companies either announcing that they are not going to be doing much hiring or actually doing layoffs," Powell said. "And much of the time they're talking about AI and what it can do. So we're watching that very carefully."
"It could absolutely have implications for job creation," he added.
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