The Securities and Exchange Commission is scrutinizing artificial intelligence companies’ disclosures amid growing concern over infrastructure spending and circular financing. The increased scrutiny comes as the agency is placing renewed emphasis on accounting enforcement.

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The SEC wants investors to understand material risks associated with AI businesses, according to SEC Director of Enforcement David Woodcock, Reuters reported Friday (Oct. 30). Technology stocks are facing pressure over the cash required to expand computing capacity and uncertainty over the returns these investments will generate.

“Our principal concern is that people are making accurate disclosures about material information so that investors know what they’re getting into,” Woodcock said, per the report.

Where adequate disclosure is absent, “then enforcement will be present,” he said, emphasizing that the agency does not want to obstruct technological innovation, according to the report.

The warning comes as chipmakers, cloud providers and AI developers become connected through investments and commercial agreements. These relationships raise a disclosure issue, including whether investors can distinguish demand supported by suppliers’ financing from spending sustained by customers’ own operations.

Meta’s latest fundraising provides a concrete example. The company increased its planned equity offerings to $97.5 billion, Reuters reported Oct. 26. Nvidia, Advanced Micro Devices and Broadcom expressed interest in investing up to $5 billion collectively. Nvidia and AMD subsequently announced investments of $3 billion and $1 billion, respectively.

Such arrangements allow suppliers to help finance customers that buy their products, reinforcing concerns about circular capital flows.

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