US Treasury Secretary Janet Yellen expressed significant concerns about the potential dangers artificial intelligence (AI) poses to the financial system's stability.

Yellen made the remarks during a keynote address on AI and financial stability at a conference. Her speech stressed the urgency of addressing these emerging risks and called on the government and private sectors to collaborate on solutions.

Advancements and Risks

Yellen acknowledged AI's advancements in the financial sector, such as improved fraud detection and enhanced customer service through chatbots.

However, she and other experts cautioned that a more profound integration of AI could lead to increased risks. These include the potential for AI to be misused in scams or market manipulation through misinformation.

Yellen warned: "Insufficient or faulty data could also perpetuate or introduce new biases in financial decision-making."

Complexities and Concerns

She highlighted the complexities of AI models, the inadequacies in current risk management frameworks, and the reliance on a limited number of models by numerous market participants as critical areas of concern.

The Treasury Department has requested information to gather stakeholders' insights about the uses, opportunities, and risks of AI in the financial services sector. This initiative is intended to inform future policymaking by incorporating expert opinions and current practices.

Top Priority

Yellen said: "The tremendous opportunities and significant risks associated with using AI by financial companies have moved this issue toward the top of Treasury's and the Financial Stability Oversight Council's agendas."

Yellen's warning comes amid wider governmental scrutiny of both AI and the companies behind the technology. The DOJ is reportedly preparing to investigate multiple tech giants, including Nvidia and Microsoft, over antitrust and competition concerns related to AI technology.

Governmental Scrutiny

According to a Financial Times report, US antitrust enforcer Jonathan Kanter announced plans to investigate the AI sector due to concerns about potential monopolies.

Kanter highlighted the need to examine AI's competitive landscape, focusing on computing power, data for training large language models (LLMs), cloud services, engineering talent, and hardware.

Kanter emphasized the urgency of preventing dominant tech firms from monopolizing the AI market. He suggested real-time regulatory intervention to be effective and less invasive.

GPU Scarcity

A particular concern is the scarcity of graphics processing units (GPUs) necessary for training LLMs, with rising demand impacting chip allocation.

The rapidly evolving landscape of AI technology necessitates vigilant regulatory oversight to ensure the stability and fairness of the financial system.