MILAN—The US economy and its financial markets are in a generational race whose implications extend well beyond the prospects for future prosperity and financial stability. The race is between AI and related technologies that hold massive potential to unlock productivity and earnings growth, on the one hand, and the unintended consequences of these technologies, on the other.
Most of us need AI to unlock those significant productivity and earnings gains, especially as the economy carries weighty legacy issues. But while the race has been remarkably smooth so far, it is likely to become far more volatile.
Count me among those who are genuinely excited about what’s happening in the AI revolution and its potential interaction with equally exciting advances in the life sciences, robotics, and eventually quantum computing. By enhancing the input that goes into so much of what we do—intelligence—AI’s economic potential is enormous. It is, as US Federal Reserve Chair Kevin Warsh framed it in his Jackson Hole speech last month, potentially a “new factor of production.”
Google’s James Manyika has gone further in conversations with me and elsewhere. AI is not just a “general purpose technology” (like electricity) that can improve how we do what we do today. With recursive self-improvement and other advances, it is also increasingly an “invention machine for inventions” that will allow us to do even better things. Such observations have fueled the promise of massively higher corporate earnings, which in turn has driven stock-market indices to record highs and channeled a massive amount of equity and bond financing to the tech sector.
Nowhere is this dynamic more vividly demonstrated than in Nvidia’s staggering earnings last month. Its eye-popping revenue growth continues to validate the size of the sector’s capital expenditures. The same dynamic is also apparent in Anthropic’s IPO preparations, where, like SpaceX, the “total addressable market” it hopes to tap is enormous.
See more: AI’s Market Path Will Get Bumpier
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