Fed Flags AI-Driven Valuations and Surging Data-Center Debt

The Federal Reserve Board on Nov. 13 published its November 2026 Financial Stability Report, warning that asset valuation pressures remain elevated and pointing to the rapid growth of debt financing the buildout of artificial-intelligence computing infrastructure.

Valuations tied to 'super intelligence'

The report, which generally reflects information available as of Oct. 28, says asset valuation pressures "continued to be elevated." It states that measures of equity valuations "have remained high, partly driven by market enthusiasm for super intelligence (SI)." The ratio of equity prices to earnings for S&P 500 companies stayed well above its historical median, the report adds, though it notes that enthusiasm was "moderated by concerns over firms' capital expenditures and debt issuance plans."

A fivefold jump in computing debt

A boxed analysis titled "Leverage in the Data Center Buildout" documents how quickly borrowing tied to advanced computing has grown. Advanced computing-related debt issuance rose to more than $680 billion by October 2026, about a fivefold increase from $130 billion in all of 2023. Such borrowing climbed from less than 6 percent of nonfinancial investment-grade corporate debt issuance in 2023 to about 31 percent in 2026.

The report estimates outstanding public debt related to advanced computing at more than $1.1 trillion as of October 2026, while noting that private credit transactions make the full magnitude harder to measure. It also flags not-yet-commenced leases with undiscounted values above $1 trillion, plus take-or-pay contracts and residual value guarantees above $2 trillion.

Bank exposure in focus

The report says the largest U.S. bank holding companies hold close to $1 trillion of exposure to large technology firms, and that the composition of computing-related debt is shifting from mostly corporate bonds toward a mix of public and private debt, structured credit and project finance.

The findings arrive amid a volatile stretch for technology and semiconductor shares. The Financial Stability Report is one of two the Board publishes each year and is intended to summarize the Board's assessment of the resilience of the U.S. financial system.

Investors are watching whether the pace of data-center spending and the debt behind it can be sustained. The Fed's assessment does not predict an outcome, but it places computing-related leverage and concentrated equity valuations on its map of potential vulnerabilities.