Development of artificial intelligence could surpass China’s industrial boom, say Capital Group

The potential of the artificial intelligence phenomenon could be greater than we realise. In the race for supremacy in this field, the tech giants are making capital investments on a scale and at a pace that could surpass the industrial boom experienced in China in the early 2000s, which many consider to be the greatest in modern history.

After joining the World Trade Organisation in 2001, China invested around $20 trillion to industrialise its economy over the following ten years. “This transformed international trade, the commodities market, the inflationary environment, labour markets and politics for an entire generation,” explains US economist Jared Franz. The current landscape of investment in artificial intelligence appears comparable in scale and potential impact.

“The debate on artificial intelligence should not be framed as a tech sector cycle nor as a question of whether or not Nvidia’s valuation is justified,” explains Franz. “The pace of investment and progress seems to indicate that artificial intelligence could have a lasting impact on GDP growth, electricity demand, capital allocation, labour markets and asset prices across all sectors.”

The historic level of spending by the hyperscalers – Amazon, Alphabet, Meta, Microsoft and Oracle – has resulted in asharp rise in demand for products from semiconductor manufacturers such as Nvidia and Broadcom, or from semiconductor foundries such as TSMC. “Artificial intelligence could be the most impactful technology of a generation and the most significant disruption to the economy,” says Mark Casey, equity manager.