The Bank of Japan (BoJ) named "developments in AI-related demand" the second of its main risks in its quarterly Outlook Report on 30 October. If profits do not keep pace with the investment, "adjustment pressure could arise", the report says, for example through asset prices1. Dearer semiconductors have already lifted Japanese durable-goods prices, and copper, materials and machinery prices are rising in trade between firms; the same chip demand led TSMC to raise its revenue forecast in October.
A box in the report traces hyperscaler demand (the spending of the largest cloud operators) down to Japanese makers of power and air-conditioning equipment, and through the September Tankan, the BoJ's quarterly survey of business conditions, to smaller firms. On jobs, the BoJ reads AI the other way round from most Western debate. Japan is short of workers, so the bank treats AI as "labor-saving investment" that tighter labour markets "could accelerate", and its worry is that the substitution of labour with capital "does not sufficiently progress".
In Dublin on 2 November, Gabriel Makhlouf, governor of the Central Bank of Ireland, said AI investment "has supported domestic activity" and flagged "the scale of the debt financing driving these investments" as a stability risk2. Ireland hosts a large share of Europe's hyperscaler data centres. Credit markets have already priced strain at one AI borrower: Oracle's credit default swap spread, the cost of insuring its debt against default, reached its 2008 level in July, Apollo's chief economist Torsten Slok said.
