Gensler further warned that reliance on a few dominant AI models could increase the likelihood of a financial crisis. He noted that the financial sector could become a "monoculture", with large parts of the industry relying on the same base data sets or models. This, he said, could lead to a situation where the market is driven off an inadvertent cliff due to the "herding effect".
Key takeaways:
- SEC chief Gary Gensler warned of the risks artificial intelligence poses to financial markets, including the potential for bias in decision making.
- He expressed concern about the 'herding' effect, where financial companies and investors all use the same few AI tools, leading to a lack of independent action.
- Gensler warned that reliance on an AI model with biases and shortcomings could lead to financial instability, potentially driving the market off an inadvertent cliff.
- He previously stated that the future financial crises will center around this technology due to the powerful economics around scale and networks.