Federal Reserve chair Kevin Warsh could threaten AI stock valuations through interest-rate decisions, not the technology itself.

U.S. M2 money supply recently climbed to more than $22.8 trillion, a new record level, fueling AI company valuations as abundant liquidity makes future earnings more valuable today.

Warsh has argued the Fed must preserve inflation-fighting credibility and could maintain elevated rates or raise them if inflation remains above the 2% target, which would increase the discount rate investors use when valuing future cash flows.

A move from a 4% to 5% Treasury yield can alter valuation models across the technology sector, pressuring stocks trading at 35x, 40x, or 50x earnings, though AI demand itself would not disappear.