Beware of the "AI bubble"! U.S. senators have formally proposed legislation requiring Wall Street to fully disclose AI risk exposure.

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U.S. Senator Elizabeth Warren has officially introduced legislation requiring financial institutions to disclose their risk exposures to AI-related companies, targeting the unprecedented scale of the current AI financing boom.

The bill, titled the "AI Bubble Transparency Act," will require financial institutions to report their debt and equity exposures to chip manufacturers, data centers, cloud service providers, and hyperscale computing companies to the Office of Financial Research (OFR).

Warren warned that AI and large tech companies are increasingly relying on "opaque forms of debt and balance-sheet magic" to finance their multi-trillion-dollar AI infrastructure projects, which, if left unchecked, could trigger "another avoidable financial crisis."

The bill comes as AI financing hits historic highs. Apollo Global Management and Blackstone have just completed a $35 billion financing arrangement for Anthropic PBC, marking one of the largest private credit deals ever. This backdrop gives Warren's legislative call greater urgency and has sparked widespread concern over the transmission of AI financing risks to the broader financial system.

Bill Core: Mandatory Disclosure, Data Reporting to Congress

According to the bill, financial institutions must submit detailed credit exposure data to the OFR, covering types of debt instruments, exposure amounts, issuer or counterparty information, interest rates, terms, and collateral details. Institutions must also provide supplementary information about the borrowers, including annual revenue, annual profit, total debt balance, and off-balance-sheet debt.

The OFR must submit a report to Congress within one year of receiving the data. The agency, established under the Dodd-Frank Act and part of the Treasury Department, is responsible for collecting and analyzing financial system data.

The bill also requires the Financial Stability Oversight Council (FSOC) to issue a public report evaluating the degree of connection between the financial system and the AI industry, including implicit exposures formed by financial institutions through indirect channels, and to propose policy recommendations to member agencies and Congress for reducing AI-related financial stability risks.

This is not Warren's first warning about AI financing risks. She wrote to Treasury Secretary Scott Bessent in January, urging him to investigate "opaque data center financing" and assess its potential risks to the financial system.

This bill is co-sponsored by Senator Richard Blumenthal. However, both Warren and Blumenthal are in the Senate minority and cannot force the bill into a voting procedure, which somewhat limits the bill’s actual progress.

Risk Debates Amid the AI Financing Boom

The rapid expansion of AI infrastructure financing is the immediate backdrop to this legislation.

The $35 billion financing package completed by Apollo and Blackstone for Anthropic is seen as a milestone transaction in the private credit market, reflecting the comprehensive penetration of AI companies into various capital market financing channels.

Meanwhile, data center projects are sparking controversy at multiple levels. Several data center projects this year have been halted or canceled due to water and electricity usage issues, and some regions have even issued new moratoriums.

Warren's bill seeks to provide a warning basis for regulators and lawmakers during the early stages of risk accumulation through systematic data collection, but given the current political landscape, whether the bill can gain enough support to advance remains highly uncertain.

Risk warnings and disclaimerThe market has risks; investment requires caution. This article does not constitute personal investment advice and does not take into account the individual user's specific investment objectives, financial conditions, or needs. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific circumstances. Investment is at your own risk. ```