Dive Brief:
- CEOs for the first time see artificial intelligence as the biggest risk, exceeding the potential harm to their industries from geopolitical turmoil, cyber intrusions, and financial and economic instability, the Conference Board said last week.
- In the face of challenges from AI, the share of CEOs planning to boost capital spending surged to 35% this quarter from 22% last quarter, the Conference Board found in a quarterly survey. At the same time, their confidence rose to the highest level since Q1 2025.
- The increase in CEO confidence signals “restored optimism among leaders of large firms,” Conference Board Chief Economist Dana Peterson said in a statement. “CEOs’ expectations for their own industry improved further, progressing from mild cautiousness to solid confidence,” she said.
Dive Insight:
CEOs, CFOs and their C-suite colleagues confront a two-pronged risk from AI. If they invest too little in the emerging technology, they may underperform bolder rivals. If they invest too much, they may yield a meager return on investment, fall short of earnings targets and face investor ire.
“AI has tremendous promise,” Fed Governor Lisa Cook said Tuesday. “Nonetheless, I view its general adoption with caution,” she said in a speech.
“AI’s emergence is poised to be the latest example of the creative destruction economist Joseph Schumpeter described almost a century ago,” Cook said, adding “we appear to be approaching the most significant reorganization of work in generations.”
While sparking innovation and creating new business opportunities, AI may also bring costs, she said.
“Job displacement may precede job creation such that the unemployment rate may rise and participation in the labor force may decline as the economy transitions,” Cook said. “This outcome could cause hardship for many workers and their families.”
In manufacturing, AI may follow the same pattern as electrification more than a century ago, generating sizable returns slower than forecast, according to Fed Governor Michael Barr.
“Within firms, there is evidence from the manufacturing sector that productivity follows a J-shape after technology adoption: adjustment costs lead to short-run losses before firms that ride it out are able to realize larger, longer-run gains,” Barr said in a Feb. 17 speech.
Sixty percent of CEOs at Fortune 500 companies ranked AI as the leading risk to their industry, an increase of seven percentage points compared with Q4 2025, the Conference Board said.
The perceived risk of AI edged out geopolitical instability and cyberrisks by one percentage point and four percentage points, respectively, the Conference Board said.
Seventy-one percent of CEOs said tariffs imposed by the Trump administration have pushed up costs for their companies, the Conference Board said.
Forty-four percent of CEOs have either passed on the costs of tariffs to their customers or plan to do so, while companies run by 27% of the CEOs absorbed the costs of the import taxes, trimming profits, according to the Conference Board.
