Artificial intelligence is capable of transforming the economy even if it is a bubble

What is the most likely outcome of the AI ​​boom? Will it be an economic turnaround or major losses for investors? I think the answer to both questions is yes. The development of artificial intelligence is perhaps the most important question about the future of the stock market and the economy as a whole. The “Big Seven” technology companies, all of which bet on artificial intelligence, represent more than a third of the market value of the Standard & Poor’s 500 index, higher than a fifth at the end of 2022, grow rapidly. Equipment and information for information processing and programs have increased by about 20% over the past year. Combined with the construction of data centers, the increased capacity of the energy needed to manage and transfer it, and the wealth effect due to rising stock prices, contributes strongly to economic growth. Bezos: The boom in spending on artificial intelligence is a ‘bubble’ that will bear fruit. This situation can continue for a long time. Many of the most important investors, namely ‘Google’, ” Meta ‘and’ Microsoft ‘, have sufficient cash and a great ability to borrow. The race to build the best AI systems is a winner-taking-all race, with strong network effects, giving them strong incentives to scale quickly, even if the revenue is. However, the velocity of implementation is limited by limited supply of slides, other specialized equipment and electricity, as well as the resources and time required to build massive data centers. How are interest rates influenced by AI spending? As a result, AI spending in 2026 will remain an important external driver of growth. This additional investment, relative to saving, also has consequences for monetary policy by increasing the ‘neutral’ level of short -term interest rates that do not stimulate or inhibit the growth of the stimulating or inhibiting, and will stimulate it at the interest rate cuts required by President Donald Trump. In the long run, the impact of AI will be transformative. This will almost certainly increase productivity as it is applied in areas, including programming, contact centers, data management, customer integration, risk monitoring, report writing, diagnostics of healthcare and pharmaceutical medicine innovation-and this impact increases as it is integrated into other processes, such as advanced robotics and self-managed cars, buses and trucks. However, this does not mean that investors will come up in the long -term winners. AI service providers must at some point earn very large income to achieve a sufficient return on their large investments. Openai finally prepares for a profit -making phase before it has no money. For example, if we assume that the costs associated with building the infrastructure required for artificial intelligence between $ 2 trillion and $ 3 trillion, the businesses involved will need an annual revenue of $ 1 trillion or more for the investments to make a good profit – partly because the infrastructure artificial intelligence will rapidly occupy. This represents at least 3% of US GDP, which I consider an unattainable target. To achieve this goal, AI businesses will need price power. To this end, they want to limit their clients to their own infrastructure. Users, on the other hand, will pay in the opposite direction. They will want to maintain the ability to switch between suppliers so that they can negotiate lower rates. If they succeed, AI income and margins will be disappointing. The history of history comes from the history of other areas, indicating that losses can be great. Previous episodes of rapid technical innovation – the spread of railways in the nineteenth century, the arrival of the Internet in the twentieth – provided as transformative, but it also involved great investment and significant declines in stock markets. On the plus side, an AI collapse will not necessarily cause a financial crisis similar to the financial crisis in 2008. This is mainly a stock market -related phenomenon. I do not see the kind of leverage and the risks of selling assets short, which would lead to the disaster that took place after the last big bubble, the US housing bubble. But it may not reassure the concerned investors.