Fears still linger about an AI bubble that explodes and wreaks havoc on the U.S. economy. Yet one thing unites Rep. Alexandria Ocasio Cortez and the White House even now: Drawing a red line against bailing out AI giants.
At the moment, AI spending is propping up major swaths of the U.S. economy. Through blunt-force investment on data centers and the related equipment to sustain them like semiconductor chips, tech companies helped grow U.S. GDP by 1.1%, per an October analysis from JP Morgan.
Yet the enormous swell of AI spending has some lawmakers unnerved about a replay of the 2008 financial crisis, should any firm go under. At the time, the housing market went bust and Wall Street banks collapsed one after another for holding a flood of toxic mortgages. The U.S. government engineered a colossal bailout to prevent the financial chaos from spreading. Yet it provoked widespread anger and a populist backlash that still haunts policymakers 17 years later.
Ocasio-Cortez was the first prominent Democrat to publicly oppose a bailout of AI firms in the event of a crisis.
“Should this bubble pop, we should not be entertaining a bailout,” the New York Democrat said during a Wednesday Congressional hearing. She argued the firms bear blame in instigating mental health issues through the AI chatbots they introduced to the public.
Others seemed to want tighter guardrails on the AI sector before green-lighting any theoretical rescue. “There needs to be vigorous oversight here,” Sen. Ron Wyden of Oregon recently told Quartz. “I’m not signing off until we have that in place ahead of time.”
No prominent AI company appears in imminent danger of collapsing. Yet they are increasingly fueling their bets with debt and circular financing deals that critics argue is akin to playing with fire in a tightly connected AI ecosystem.
That doesn’t mean it hasn’t made mistakes along its path to dominance. OpenAI stepped into a mess earlier this month when its chief financial officer Sarah Friar endorsed a federal backstop so it can finance its ambitions through borrowing. She walked it back less than a day later. The White House, though, quickly squashed any government rescue.
“There will be no federal bailout for AI. The U.S. has at least 5 major frontier model companies,” White House AI czar David Sacks said at the time. “If one fails, others will take its place.”
Shortly after, OpenAI CEO Sam Altman reiterated that his company won’t need or seek a bailout. Not everyone is convinced.
Sen. Elizabeth Warren of Massachusetts sent a letter on Tuesday demanding details from senior White House advisors on their meetings with executives from OpenAI and other AI companies. It singled out that OpenAI had sought loan guarantees and access to federal tax credits, as recently as in an Oct. 27 letter sent to the White House.
“OpenAI’s actions suggest that it may be pursuing a deliberate strategy to entangle itself with the federal government and the broader economy so the government has no choice but to step in with public funds,” Warren said. Then, she drew a parallel to the 2008 financial crash.
