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The International Monetary Fund (IMF) has warned any crackdown on artificial intelligence (AI) as being pushed by United States Democrats could slow investment in the fast-growing technology sector, weaken economic growth and complicate efforts by central banks to control inflation.
IMF Managing Director, Kristalina Georgieva, said any slowdown in economic growth driven by AI investment would be an important consideration for central banks as they decide how to tackle persistent inflation.
Her warning comes amid plans by Democrats, who secured control of both chambers of the US Congress in the November midterm elections, to introduce tougher legislation targeting AI companies and the development of data centres when they assume control in January.
The proposed measures are expected to focus on protecting consumers from rising electricity costs linked to data centres, requiring independent safety tests for advanced AI systems and making technology companies accountable for harm caused by their products.
The plans have raised concerns among investors that tighter regulations could slow the rapid expansion of AI infrastructure, which has become a major driver of investment and economic growth in the United States and other economies.
Speaking at the IMF headquarters in Washington at the weekend, Georgieva said concerns about heavy dependence on AI investment and high technology company valuations were already creating uncertainty in financial markets.
She noted that the AI investment boom had been supporting economic growth in some countries and helping to cushion the impact of the oil supply shock caused by the war in the Middle East.
However, she warned that the boom was also adding to inflationary pressures and creating risks to financial stability.
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“Should there be a slowdown in the AI-driven growth impulse, it would need to be factored in as central banks assess the necessary steps in the fight against stubborn inflation,” she said.
Georgieva’s comments followed a sharp sell-off in technology stocks on Thursday, as investors reacted to fears that the Democrats’ election victory could lead to tighter regulation and slower construction of data centres.
The market concerns were compounded by doubts over whether huge investments in AI infrastructure would generate enough returns for technology companies.
The IMF had warned last month that a sharp decline in AI investment could trigger falling asset prices and reduce global economic output by 1.1 per cent by 2028. The United States could suffer a 1.8 per cent contraction in output under that scenario.
Although Georgieva did not repeat those projections, she acknowledged that continued volatility in technology markets would make the task of central banks more difficult.
The Democrats’ planned legislative push marks a departure from the approach of the Republican-led Congress, which largely supported AI development and resisted efforts to introduce restrictions on the technology.
The incoming lawmakers have also promised closer scrutiny of major technology companies, including OpenAI, Anthropic, Meta and Google’s parent company, Alphabet.
However, passing the proposed legislation could prove difficult while President Donald Trump remains in office, as he has repeatedly opposed calls for mandatory federal rules governing AI development.
