Chicago Fed's Goolsbee sees economic dangers in overestimating AI productivity gains

Chicago Fed President Austan Goolsbee warned that market and policymaker expectations of a near-term AI-driven productivity boom may be premature. If investors and firms overestimate AI’s near-term impact, the economy could overheat before productivity gains materialize, raising the risk of preemptive Fed tightening. That dynamic heightens downside risk for equity valuations — particularly for tech-linked stocks and the S&P 500 — as higher inflation or policy response would compress multiples and increase volatility. Investors should price in greater uncertainty around the timing of AI benefits and potential monetary-policy reactions.