Nicholas Fawcett, a senior economist at BlackRock Investment Institute and an expert in AI's economic impact, shares insights on how AI is reshaping industries and economies. He discusses the three phases of AI's evolution: build-out, adoption, and transformation. The conversation highlights the capital investment rush led by companies like NVIDIA, the potential for AI to boost productivity and create new jobs, and strategies for investors to navigate this rapidly changing landscape while seizing emerging opportunities.
AI is currently in its build-out phase, requiring significant investments in infrastructure like data centers and specialized chips.
The evolution of AI is expected to reshape industries and job markets, creating new roles while enhancing existing jobs.
Deep dives
Impact of AI on Economic Growth
AI is set to significantly influence job markets and economic growth by acting as a structural driver across various sectors. Although the full extent of AI's impact remains uncertain, it's evident that we are currently in the build-out phase, where infrastructure for AI is being established. This initial phase sees companies investing heavily in necessary resources like data centers and specialized chips, with key players like NVIDIA leading the charge. As AI technology evolves, it holds the potential to unlock substantial productivity improvements and drive economic growth, although this will depend largely on its adoption across industries.
Investment Opportunities in AI
The ongoing development of AI has created unique investment opportunities, particularly for firms positioned at the forefront of the technology's evolution. Companies engaged in the build-out of AI infrastructure are seeing substantial market performance, which may increase as demand continues to grow. The anticipated capital expenditure associated with AI, projected to reach around $700 billion annually in the U.S. by 2030, underscores the financial commitment from large tech firms aiming to maintain their competitive edge. Investors are encouraged to adopt an active approach, identifying niche opportunities and considering investments in both established and emerging companies in order to capitalize on AI's potential.
Transformative Nature of AI Across Sectors
AI's transformative capabilities extend beyond just technological advancements; it is poised to reshape entire industries and the labor market itself. Historical precedents indicate that technological evolution can lead to substantial shifts in job functions, as seen during the Industrial Revolution, which dramatically altered the agricultural workforce. While AI will likely streamline productivity, it will also create new job opportunities that are not yet conceived, as evidenced by the developments in logistics and e-commerce sectors. The integration of AI across various fields, including finance, education, and healthcare, illustrates its potential to enhance existing jobs rather than displace them entirely, ultimately changing the way labor is deployed.
AI has been dominating investing headlines for almost two years, but it's not just a buzzword. It's a powerful technology that's poised to revolutionize industries and economies on a global scale. Investors are asking how will AI reshape job markets, productivity and economic growth? Nicholas Fawcett, a senior economist in the BlackRock Investment Institute joins Oscar to explore what AI means for the broad economy and the different stages of AI's evolution.
Sources: Productivity estimates based on Brynjolfsson, Li, and Raymond (2023), Dell’Acqua et al. (2023) , Cui et al. (2024); Capex spend from BlackRock Investment Institute, Reuters, October 2024; Agricultural data based on IPUMS USA, October 2024
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