AI’s Trillions

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AI is extraordinary. The economics are not.
Artificial intelligence has triggered the largest coordinated capital commitment of the modern technology era. The builders will spend close to $800 billion this year and approach $1 trillion next year on chips, data centers, networks, and power. Total AI revenue this year will be roughly $150 to $200 billion.
AI will reshape the global economy, and much of the capital financing that transformation will be impaired. Revenue, productivity, and cash flow will all arrive, but on the wrong schedule, after much of what was built to capture them has lost its economic value.
We have seen this movie. Railroads. Telephone and wireless networks. Fiber. The commercial internet. Each transformed the economy. Each destroyed the capital of those who built it first. The infrastructure survived. The investors did not.
The question is not whether the AI opportunity is real. The question is who pays for the gap between when the capital is spent and when the value arrives. AI may define this era. The uncertainty is whether today’s owners, creditors, communities, and ratepayers capture enough of its value to justify what they’re building with their capital.

Investment Principles

Stimulus and silliness

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The world economy is struggling to escape the Covid-19 economic shock. During the worst of this pandemic, the world’s developed economies provided an enormous fiscal stimulus on a scale not seen since the second world war.

Now, however, the US is proposing to more than double its already generous fiscal stimulus. Is this a good idea or excessively risky?

Go Big, But Where?

For its proponents, the idea of “going big” is designed to be a transformative political moment. But too much appears allocated inefficiently, and it may simply be irresponsible.

An easy money era produced only anemic growth. But the scale and direction of additional stimulus look more like irresponsible fiscal policy leading to significant overheating and the waste of resources. While there is a strong case for a more aggressive approach to fiscal policy, that policy still needs to be grounded in economic realities and reasonable priorities. These are not.