Question A:
The AI-led boom in investment and growth has substantially increased the exposure of the economy and the stock market to a single concentrated source of tail risk.
Responses
Responses weighted by each expert's confidence
Question B:
The use of financing from technology suppliers such as Nvidia to support investments in AI infrastructure substantially increases the financial risks associated with the AI-led boom.
Responses
Responses weighted by each expert's confidence
Question A Participant Responses
| Participant | University | Vote | Confidence | Bio/Vote History |
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 Viral Acharya |
NYU Stern | Bio/Vote History | ||
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 John Campbell |
Harvard | Bio/Vote History | ||
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 John Cochrane |
Hoover Institution Stanford | Bio/Vote History | ||
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Sure, there is a big bet going on, as there was on internet 1999. But the biggest dangers are aggregate, not idiosyncratic; risks that hit many industries: War, financial crisis, etc.
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 Douglas Diamond |
Chicago Booth | Did Not Answer | Bio/Vote History | |
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 Wenxin Du |
HBS | Bio/Vote History | ||
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 Darrell Duffie |
Stanford | Bio/Vote History | ||
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AI-induced expected growth in national productivity is substantial, by most accounts. It's mainly an issue of 1/(r -(g+\Delta g)).
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 Andrea Eisfeldt |
UCLA Anderson | Did Not Answer | Bio/Vote History | |
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 Eugene Fama |
Chicago Booth | Did Not Answer | Bio/Vote History | |
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 Xavier Gabaix |
Harvard | Bio/Vote History | ||
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 Itay Goldstein |
UPenn Wharton | Bio/Vote History | ||
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 John Graham |
Duke Fuqua | Bio/Vote History | ||
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 Campbell R. Harvey |
Duke Fuqua | Bio/Vote History | ||
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1. Substantially for stocks but not economy - given most of CAPEX (chips) imported; 2) While some debt, most spending through op cash flows - so this is more like 2000 than 2006; 3) Higher risk is usually associated with higher expected returns - in this case, higher GDP growth,
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 Harrison Hong |
Columbia | Bio/Vote History | ||
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 Wei Jiang |
Emory Goizueta | Bio/Vote History | ||
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 Steven Kaplan |
Chicago Booth | Bio/Vote History | ||
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Answer is probably yes, but expected benefits are very high. So risk-return is extermely favorable.
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 Anil Kashyap |
Chicago Booth | Bio/Vote History | ||
 Arvind Krishnamurthy |
Stanford GSB | Bio/Vote History | ||
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 Camelia Kuhnen |
UNC Kenan-Flagler | Bio/Vote History | ||
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 Michelle Lowry |
Drexel LeBow | Bio/Vote History | ||
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 Sydney Ludvigson |
NYU | Bio/Vote History | ||
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 Matteo Maggiori |
Stanford GSB | Bio/Vote History | ||
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 Loretta Mester |
UPenn Wharton | Bio/Vote History | ||
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Stock market indices have become dominated by the hyperscalers. The hyperscalers have taken on more debt, and suppliers are funding their customers.
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 Tobias Moskowitz |
Yale School of Management | Bio/Vote History | ||
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 Tyler Muir |
UCLA Anderson | Did Not Answer | Bio/Vote History | |
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 Stefan Nagel |
Chicago Booth | Bio/Vote History | ||
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 Dimitris Papanikolaou |
Northwestern Kellogg | Bio/Vote History | ||
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 Jonathan Parker |
MIT Sloan | Bio/Vote History | ||
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 Christine Parlour |
Berkeley Haas | Did Not Answer | Bio/Vote History | |
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 Thomas Philippon |
NYU Stern | Bio/Vote History | ||
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 Manju Puri |
Duke Fuqua | Bio/Vote History | ||
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 Michael R. Roberts |
UPenn Wharton | Bio/Vote History | ||
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 Paola Sapienza |
Hoover Institution Stanford | Bio/Vote History | ||
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 Amit Seru |
Stanford GSB | Bio/Vote History | ||
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 Robert Stambaugh |
UPenn Wharton | Bio/Vote History | ||
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 Laura Starks |
UT Austin McCombs | Did Not Answer | Bio/Vote History | |
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 Jeremy Stein |
Harvard | Bio/Vote History | ||
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 Johannes Stroebel |
NYU Stern | Did Not Answer | Bio/Vote History | |
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 David Thesmar |
MIT Sloan | Bio/Vote History | ||
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not that this is a bad thing, though
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 Sheridan Titman |
UT Austin McCombs | Bio/Vote History | ||
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 Stijn Van Nieuwerburgh |
Columbia Business School | Bio/Vote History | ||
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economy massively exposed to AI demand risk & technology risk; key engine of growth today; lots of upstream and downstream linkages
-see background information here |
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 Nancy Wallace |
Berkeley Haas | Bio/Vote History | ||
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I have spent a lot of time evaluating the off balance sheet debt deals and the heavy PE use of wholly owned insurance co. to park the debt. The omni presence of Nvidia, Open AI, and Anthropic as counter parties in these deals is very concerning!
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 Toni Whited |
UMich Ross School | Bio/Vote History | ||
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 Haoxiang Zhu |
MIT Sloan | Bio/Vote History | ||
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Question B Participant Responses
| Participant | University | Vote | Confidence | Bio/Vote History |
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Viral Acharya |
NYU Stern | Bio/Vote History | ||
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John Campbell |
Harvard | Bio/Vote History | ||
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John Cochrane |
Hoover Institution Stanford | Bio/Vote History | ||
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Modigliani and MIller. Plus, stocks going down are not a crisis. Crisis is always and everywhere short-term debt - Doug Diamond.
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Douglas Diamond |
Chicago Booth | Did Not Answer | Bio/Vote History | |
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Wenxin Du |
HBS | Bio/Vote History | ||
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Darrell Duffie |
Stanford | Bio/Vote History | ||
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The feedback between providers and users of funding, although not necessarily inefficient overall, does increase fragility.
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Andrea Eisfeldt |
UCLA Anderson | Did Not Answer | Bio/Vote History | |
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Eugene Fama |
Chicago Booth | Did Not Answer | Bio/Vote History | |
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Xavier Gabaix |
Harvard | Bio/Vote History | ||
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Itay Goldstein |
UPenn Wharton | Bio/Vote History | ||
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John Graham |
Duke Fuqua | Bio/Vote History | ||
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Campbell R. Harvey |
Duke Fuqua | Bio/Vote History | ||
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I know this reminds us of Lucent and Nortel in 1999 and vendor financing. However, there is a crucial difference. The vendor financing is a small compared to Nvidia's cash flows. Also, Nvidia's balance sheet much stronger than Lucent's was.
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Harrison Hong |
Columbia | Bio/Vote History | ||
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Wei Jiang |
Emory Goizueta | Bio/Vote History | ||
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Steven Kaplan |
Chicago Booth | Bio/Vote History | ||
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Anil Kashyap |
Chicago Booth | Bio/Vote History | ||
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circular financing chains are risky
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Arvind Krishnamurthy |
Stanford GSB | Bio/Vote History | ||
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Camelia Kuhnen |
UNC Kenan-Flagler | Bio/Vote History | ||
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Michelle Lowry |
Drexel LeBow | Bio/Vote History | ||
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Sydney Ludvigson |
NYU | Bio/Vote History | ||
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Matteo Maggiori |
Stanford GSB | Bio/Vote History | ||
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Loretta Mester |
UPenn Wharton | Bio/Vote History | ||
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Suppliers are funding their customers, which creates concentration risk. Reports suggest very high leverage, but there is opacity around the amounts, which increases the risk.
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Tobias Moskowitz |
Yale School of Management | Bio/Vote History | ||
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Tyler Muir |
UCLA Anderson | Did Not Answer | Bio/Vote History | |
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Stefan Nagel |
Chicago Booth | Bio/Vote History | ||
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Dimitris Papanikolaou |
Northwestern Kellogg | Bio/Vote History | ||
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Jonathan Parker |
MIT Sloan | Bio/Vote History | ||
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Financing the AI investment boom by lending from suppliers of chips to users of chips keeps more of the risks within the sector and out of banks, pension funds, etc. If AI turns out to be less profitable than expected, the financial fallout has less systemic impact.
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Christine Parlour |
Berkeley Haas | Did Not Answer | Bio/Vote History | |
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Thomas Philippon |
NYU Stern | Bio/Vote History | ||
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Manju Puri |
Duke Fuqua | Bio/Vote History | ||
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Michael R. Roberts |
UPenn Wharton | Bio/Vote History | ||
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Paola Sapienza |
Hoover Institution Stanford | Bio/Vote History | ||
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Amit Seru |
Stanford GSB | Bio/Vote History | ||
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Robert Stambaugh |
UPenn Wharton | Bio/Vote History | ||
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Laura Starks |
UT Austin McCombs | Did Not Answer | Bio/Vote History | |
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Jeremy Stein |
Harvard | Bio/Vote History | ||
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Johannes Stroebel |
NYU Stern | Did Not Answer | Bio/Vote History | |
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David Thesmar |
MIT Sloan | Bio/Vote History | ||
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looking at NVIDIA, the balance sheet is strong and big, and the guarantees and commitments aren't that large. most of the risk is borne by private credit and the bond market
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Sheridan Titman |
UT Austin McCombs | Bio/Vote History | ||
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Stijn Van Nieuwerburgh |
Columbia Business School | Bio/Vote History | ||
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Nvidia is lending its balance sheet to facility more investment into GPUs by financially weaker companies. The guarantees it has provided are in the hundreds of billions. Entire AI ecosystem has become vulnerable to Nvidia shock.
-see background information here |
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Nancy Wallace |
Berkeley Haas | Bio/Vote History | ||
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Same response. Just look at the hyperscalers 10K's to get a sense of. the problem.
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Toni Whited |
UMich Ross School | Bio/Vote History | ||
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Haoxiang Zhu |
MIT Sloan | Bio/Vote History | ||
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