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Federal Reserve Chair Jerome Powell said Wednesday that asset prices remain elevated by many metrics, attributing much of the surge to rising valuations in technology and artificial intelligence (AI) stocks.
His comments followed the latest shake-up in the AI spaceChinese startup DeepSeek unveiled a low-cost language model on Monday, sparking concerns among U.S. tech giants that have invested billions. The development led traders to reconsider the high valuations of major AI players.
Speaking after the Fed's decision to hold interest rates steady, Powell acknowledged AI's growing impact on markets but suggested it wasn't yet causing broad financial shifts. He noted that while AI is shaping parts of the stock market, the Fed focuses on larger macroeconomic trends and sustained financial changes, rather than short-term market moves.
Tech stocks rebounded Tuesday but remained in focus Wednesday as Microsoft (NASDAQ:MSFT) and Meta Platforms (NASDAQ:META) released earnings. Apple (NASDAQ:AAPL) is set to report on Thursday. Powell also pointed out that evaluating financial conditions requires more than just looking at stock prices. Higher interest rates, he said, have tightened financial conditions overall, though the broader economic environment remains mixed.
This article first appeared on GuruFocus.