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Key takeaways
- BlackRock CEO Larry Fink this week defended the massive spending on artificial intelligence, saying that “other countries would overtake” the United States otherwise.
- He also linked ongoing technological change to the US economy, asking whether the lack of job growth this year should be attributed to uncertain policies or labor substitution.
There are concerns about spending on artificial intelligence. Sometimes that means concerns that companies developing AI capabilities aren’t spending enough.
Larry Fink, chairman of BlackRock (BLK), the world’s largest asset manager, yesterday defended spending on artificial intelligence during a wide-ranging interview at the New York Times DealBook Summit. “If we don’t spend enough – faster – on artificial intelligence, digitization and coding, other countries will overtake us,” he said.
Fink’s comments came amid ongoing debate about whether the AI sector has outgrown its skis, with some likening enthusiasm around the technology to the dot-com bubble. While spending on AI development has raised investor doubts and hurt shares of the space’s biggest players, including Oracle (ORCL), Microsoft (MSFT), and Amazon (AMZN), Fink said the technological change underway is already evident in the U.S. labor market and companies’ margins.
Why does this matter to you?
As big tech companies invest more in artificial intelligence and cut their headcount, corporate executives, analysts and central bank officials increasingly point to the so-called “K-shaped economy,” which describes a situation in which high-income earners and some industries thrive while lower-income households and other businesses struggle.
The CEO of New York-based BlackRock, which managed more than $13 trillion in assets as of the third quarter, said that while hyper-scaled CEOs “aren’t sure whether they’re overspending or underspending,” their conviction about future demand was high and most of them don’t have the raw processing power needed to run their AI models.
However, Fink did not completely rule out the possibility that some companies will show disappointing results. “I’m not here to suggest that there won’t be some headline explosions,” he said. “There will be some big winners and big failures.”
The cost of building global data centers, artificial intelligence infrastructure and related energy supplies could cost more than $5 trillion in the coming years, according to JPMorgan analysts. A 10% return on typical AI investments through 2030 would mean roughly $650 billion in annual revenue in perpetuity, they said.
Fink linked the development of AI technology to a K-shaped economy, which describes a bifurcation in the recovery in which some industries and segments of the population experience significant growth while others suffer.
“What I think is happening is that more and more companies are doing more with the same number of people or fewer,” Fink said. “This technological change is happening today, but it will have a profound impact on our economy.”
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