Utilizing confidential microdata from the Census Bureau’s new technology survey (technology module of the Annual Business Survey), we shed light on U.S. banks’ use of artificial intelligence (AI) and its effect on their small business lending. We find that on average 11% of banks use AI from 2017 to 2022. Banks with greater AI usage lend significantly more to distant borrowers, about whom they have less soft information. In contrast, we do not find similar effects for cloud systems, other software, or hardware surveyed by Census, highlighting AI’s uniqueness. Moreover, AI’s effect on distant lending is more pronounced in counties with more constrained credit and more minority-owned small businesses. Last, banks with greater AI usage experience lower default rates from and charge higher interest rates to distant borrowers. Altogether, our evidence suggests that AI reduces banks’ reliance on soft information and that its gains in hard information appear to overcome those losses, net reducing the information asymmetry between banks and distant borrowers.