Does ‘Buy American’ Policy Make Sense? The Answer Is Key for Your AI Portfolio
Who benefits the most from a new invention, those producing it or those using it? The answer matters for investors and governments pouring money into artificial intelligence, green technology and chip production. Economists who warn against a fixation on “making stuff" point out that decades-old digital tools had scant effect on U.S. productivity until companies adopted them in the 1990s.
Yet technology production, broadly defined, is also the backbone of many of the world’s most successful companies and economies. Since startup OpenAI last year unveiled its ChatGPT bot, enthusiasm about generative AI has powered the stocks of software giants and chip maker Nvidia, and unlocked funds for AI-focused startups. More recently, stock investors have also started betting that the technology will reward non-tech firms that have a first-mover advantage in implementing it.
In a May report, UBS analysts identified potential winners, such as plane maker Airbus, which is using AI to predict maintenance needs, and card networks Visa and Mastercard, which deploy it to detect fraud. Their stocks have outperformed the potential losers. A related debate underlies Western governments’ recent turn toward industrial policy.
The $700 billion in subsidies and investment that the Biden administration has mobilized through the Inflation Reduction Act and the Chips Act has unleashed a string of plant projects related to semiconductors, electric vehicles and renewable energy. Spending on manufacturing construction was up a whopping 77% in May from a year earlier. Critics say the focus should be on adopting the new tech, while letting trade dictate who makes it.
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