Fed Sees AI as New Factor of Production Amid Rapid Investment Growth
Federal Reserve Chairman Kevin Warsh believes that artificial intelligence (AI) will permanently change the growth potential of the United States. In his first speech at Jackson Hole, he described the current period as an 'turning point in history.' However, he admits that the Fed still does not know when productivity gains will appear, how employment will progress, and which companies will capture the created value.
The current AI investments are rapidly increasing among companies. The corporate spending on equipment and intangible assets increased by nearly 9% in one year, their highest rate since 2021. More than half of this growth would come from AI-related infrastructure.
The Federal Reserve now views AI as a new factor of production. This progress is already visible in investments. Companies employing AI may also gain some of the value through cost reductions or increased production. Users would benefit from cheaper or more efficient services.