Special Series | AI & Your Money: The Global Economy, and The $40 Trillion Question

We are early in this evolution, but already AI impacts our daily lives at home and at work. How it will continue to change our individual lives as well as individual, national and global economics remains to be seen, but two things are almost entirely certain: the impact will be enormous, and the path toward that evolution will require both careful navigation and great adaptability by all. 

At the office, AI has started to make workers more productive, which is what companies need as the Baby Boomers retire. And billions of dollars are being spent to build the infrastructure needed to run AI, creating jobs and economic activity that has kept the US economy humming and supported the government’s $40 trillion debt load. 

In the future, some fear AI will replace too many workers or decide to eliminate mankind. At WHZ, our investment committee will be monitoring AI’s impact on productivity and employment as well as the technology community’s actions to ensure AI is developed responsibly. We remain optimistic that AI will improve everyone’s lives. Here’s why... 

Everyone's Learning New Tricks

When OpenAI introduced ChatGPT to the world in 2022 the average American could see how they might use this technology in their every-day lives. Using a computer to turn a descriptive sentence into a picture seems simple now, but even just two years ago it was mind blowing.  

Now AI can help you book a restaurant reservation, find and purchase that special outfit, create a travel itinerary, drive a taxi, or prioritize and draft emails. Businesses are using AI to do a variety of repetitive tasks, freeing up workers to do higher-value work. AI can answer customers’ online questions, develop personalized marketing campaigns, create spreadsheets and presentations, detect cyberthreats and fraud, discover new medicines, write software and much, much more.  

In an online survey conducted by McKinsey & Co. this summer, 89% of businesses said AI was being used regularly in at least one business function and 56% said AI was being used in three or more business functions.   

AI's Enhancing Productivity 

AI has arrived at an opportune time. The Baby Boomer generation has reached or is approaching retirement and corporations need a way to replace them. AI may be the solution, allowing remaining workers to become more efficient, accomplishing more in less time. The impact is already being felt: Eight in ten respondents to McKinsey’s survey said AI had improved their productivity.  

There have been concerns that AI will get so good at our jobs that it will result in massive layoffs. So far, that hasn’t been the case. Some companies have slowed their hiring, particularly in areas directly affected by AI, like computer programming. But the unemployment rate remains near historic lows, at 4.2%.  

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AI Keeps The US Economy Humming 

AI has resulted in massive demand for computing power and the energy to run that computing power. Companies are building enormous data centers and filling them with specialized semiconductors to provide the computing power AI requires. They’re also funding the expansion of existing utilities, upgrading the electric grid, and in some cases building new electricity generation in the same location as the data centers.  

The five largest hyperscalers, Amazon, Alphabet (parent company of Google), Microsoft, Oracle, and Meta, are expected to spend about $800 billion on AI infrastructure this year. That’s almost double the $413 billion they spent last year. In addition, these companies and other large technology companies have agreed to lease data centers for billions of dollars.  

All of this spending and building has created many jobs related to data center construction including engineers, electricians, HVAC installers, welders, and concrete workers. It has sent demand for semiconductors and wiring skyrocketing.  

Stocks related to building AI or providing AI have benefited from this boom. The Nasdaq stock index, which is heavily exposed to technology stocks, has risen roughly 17% so far this year and is on the cusp of marking its fourth year of positive returns, thanks in part to the AI boom. The S&P 500 Semiconductor index has jumped 41% this year and the S&P 500 Construction Machinery & Heavy Trucks index has gained 27.1%.  

The stock market rally has led to a massive increase in consumers’ wealth and boosted consumer spending, even at a time when the geopolitical environment has presented economic challenges. Added together, AI and its related ripple effects may be responsible for roughly one-third of US economic growth.  

What Comes Next

WHZ will continue to track the advancements that AI makes possible and the impact it has on the economy and markets. We believe AI-related investments warrant a position in well-diversified portfolios, with allocations reflecting each client’s risk tolerance.  

We’ll also continue to examine the impact of AI on the human aspect of finance and economics. How will this technology affect how we earn money, invest, and plan our futures, both financially and otherwise? How can we best leverage all the positive capabilities it has to offer while guarding against its risks?  

That’s what this AI & Your Money series is all about. Our next piece, due out November 6th, will explore “Who Wins the AI Race, and What Happens If It Isn’t the U.S.?” In the meantime, i 

If you have questions about how AI-related investments fit into your portfolio, reach out to our team at 860-928-2341 or visit whzwealth.com for a complimentary consultation. Learn more about how we work to provide our clients with “Absolute confidence. Unwavering partnership. For life.”  

Related FAQ's 

How is artificial intelligence (AI) affecting the US economy? 

AI is driving a wave of spending on data centers, semiconductors and power generation. That spending creates construction jobs and lifts tech stocks, which makes households wealthier and boosts consumer spending. Taken together, AI and its ripple effects may account for about one-third of US economic growth. 

How much are big tech companies spending on AI? 

The five largest hyperscalers are Amazon, Alphabet, Microsoft, Oracle and Meta. Hyperscalers are the companies that run the giant cloud computing networks behind AI. They’re expected to spend about $800 billion on AI infrastructure this year, nearly double the $413 billion they spent last year. On top of that, they’ve signed data center leases worth billions more. 

Is AI causing widespread job losses? 

Not so far. Some companies have slowed hiring in areas AI touches directly, such as computer programming. Still, the US unemployment rate is 4.2%, close to historic lows. Building data centers has also created demand for engineers, electricians, HVAC installers, welders and concrete workers. 

How has AI affected the stock market this year? 

AI-related stocks have led the rally. The Nasdaq is up about 17% so far this year and is close to a fourth straight year of positive returns. The S&P 500 Semiconductor index has gained 41.0%, and the S&P 500 Construction Machinery & Heavy Trucks index is up 27.1%. 

How are businesses using AI today? 

In a McKinsey & Co. survey, 89% of businesses said they use AI regularly in at least one business function, and 56% use it in three or more. Common uses include answering customer questions, building spreadsheets and presentations, writing software, detecting fraud and speeding up drug discovery. 

Why does AI matter as Baby Boomers retire? 

As Baby Boomers retire, companies need a way to get the same work done with fewer people. AI can help each remaining worker do more in less time. In McKinsey’s survey, eight in 10 respondents said AI had made them more productive. 

What does AI have to do with the $40 trillion national debt? 

A government carrying $40 trillion in debt needs the economy to keep growing, because growth brings in the tax revenue that services that debt. Spending on AI infrastructure has been one of the main things keeping US growth going. 

Should my portfolio include AI-related investments? 

WHZ believes AI-related investments belong in a well-diversified portfolio. How much you hold should depend on your risk tolerance. To talk through how AI fits your plan, call WHZ at 860-928-2341 or visit whzwealth.com to book a complimentary consultation.