The disruptive power of the technology in security, labour markets with job displacement, environmental impact and more are already enough to fear, but at the top of concerns for the world’s central bankers are its impact on the global economy, whether AI does well or not.
"If AI overdelivers, it will impact financial stability. If AI underdelivers, it will impact financial stability," said Apollo Global Management’s Torsten Slok at one of the main panels during the annual meet in Portugal.
A successful AI could result in major unemployment and create major instability in the economy as nobody can afford to spend anymore. However, if AI fails, the major investments into it will also fail, and also create economic issues.
"The internet proved to be better than anybody imagined, created whole new businesses, but we still got the dotcom bubble," said Bank of Canada Governor Tiff Macklem.
"It doesn't mean there can't be a period where the market gets ahead of itself, and, and you see an entrenchment."
While bankers at the meet acknowledged that AI could bring about significant improvements to most aspects of life, the fear of disruption was also a key talking point in every discussion, including immigration and climate.
"This is the biggest time of consequence to each of our economies, I think, in our lifetime," Warsh said about the AI revolution,” said Federal Reserve Chairman Kevin Warsh.
"Who knew when the internet was born that the internet was going to create a million and a half jobs as Uber drivers? We are in the first to second inning of this revolution.”
Automation is already majorly prevalent in finance, running most trading functions. However, as seen by Reuters, Professor Itay Goldstein of the University of Pennsylvania says that the tool could also manipulate financial bubbles to profit on both sides.
"Something that is even more advanced and potentially more disturbing, is the ability of these algorithms to coordinate on a manipulative path of prices," University of Pennsylvania professor Itay Goldstein said.
"These algorithms indeed manage to achieve this kind of manipulation, creating bubbles leading to crashes, and this, I think, has more significant implications for financial stability," he added.
AI stocks are already bubbling, estimated to have added one percentage point to the GDP of the US alone, according to Slok.
"The scale and pace of the current AI investment boom accompanied by expectations of large productivity payoffs bear resemblance to these precedents, highlighting potential downside risks in the near term," said the Bank for International Settlements in a report.
AI is also highly present in bank operations, and could be a great tool in the lending space, with credit analysis and funding borrowers. However, when it comes to defending against new AI threats, only the most wealthy firms and nations are going to have a chance, creating a divide between banks.
Bank of England Deputy Governor Sarah Breedeen says an insurance scheme for failing banks of some kind could be the solution.
"In a cyber context, do we need systems that allow one institution to pick up another’s basic functions during disruption?" she said.
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