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We often hear that we are a consumer driven economy, with estimates that consumer spending provides as much as 70% of GDP. I read a recent article by Ben Carlson that indicated that, at least for this year, Big Tech’s capital expenditure spending on AI is approaching a similar level. The Bloomberg Magnificent 7 Total Return Index (I had no idea this existed) is up about 39% over the past year, compared to about 19% for the S&P 500. I have no idea where this will go, but it’s fascinating to watch.
Rick, do you think one day we’ll scan or input a bunch of documents into TurboTax AI and out will come a near perfect tax return? Taxes are so complicated now they need AI.
Patrick, thanks for reading and commenting. Great question. For many AARP clients with simple returns it is simply a matter of inputting their data and checking it, then writing out the return. If they are repeat customers their personal data is carrie over, which makes it even easier. We are not allowed to download data directly from financial institutions like individuals can do. Many taxpayers download their W-2s and 1099s electronically. If their returns don’t have much else, and take the standard deduction, it is pretty much complete.
The one area that I’m not sure AI can handle yet, and probably the best feature of the VITA program, is that each return is completely checked by another experienced preparer.
Saw a stat recently that nearly 70% of profits in the S&P 500 Index were generated by the top 10 companies.This concentration is certainly scary but just need to trust the process and think long term. At least that’s what I’m doing considering my retirement is far away!
It’s a little scary to have that much concentration in so few companies. Hard to imagine it ends well.
For you folks interested in AI, check out: ‘The Coming Wave, Technology, Power and the 21st Century’s Greatest Dilemma’ by Mustafa Suleymen. Bill Gates, et al, recommended this book in a WSJ article. Suleymen is co-founder of Deepmind an AI company bought by Google. He became vice president of AI product management and policy at Google. I asked ChatGPT to summaries the book.
The book describes how artificial intelligence is becoming a “meta-technology” — a kind of master tool that will supercharge progress in almost every field. He explains that today’s large language models (like ChatGPT) are just the start; the next generation, which he calls Artificial Capable Intelligence (ACI), will be able to plan, make decisions, and carry out complex real-world tasks on its own. AI is already speeding up drug discovery, helping diagnose rare diseases, and driving new breakthroughs in science. Combined with robotics, it could transform industries from farming to shipping, while advances like quantum computing may make AI even more powerful — and also threaten current cybersecurity.
Suleyman also warns about what he calls the “Gorilla Problem”: just as humans vastly outthink gorillas, future AI might surpass human intelligence so much that we can’t control it. Because AI is made of software and can spread easily, it’s harder to “contain” than physical inventions like nuclear technology. He argues that the coming wave of AI and related tech — robotics, biotech, quantum computing — will bring huge benefits but also serious risks, so we need to think now about how to steer it safely.
Rick, thanks for a thread that’s generated some interesting comments and links.
You are very welcome.
It’s still very early in the global AI competition. Recent Wall Street Journal headlines include “China’s Lead in Open-Source AI Jolts Washington and Silicon Valley.” China, leveraging abundant and increasingly green energy resources, is focusing heavily on “Delete America” supply chain, and on open-source AI models to capture users and foster faster innovation. Chinese DeepSeek is only the first sign of the future to come. Meanwhile, most AI models in the U.S. are proprietary and few in number. A majority of US capital expenditure on AI has gone toward energy, data center infrastructure, and hardware like Nvidia chips.
The current AI competition feels like the early days of the Android vs iOS battle around 2008, with China pushing open ecosystems while the U.S. emphasizes proprietary chips and models.
If misused, AI’s power could bring unintended consequences as easily as it brings progress. In the AI race, the winner gets the Midas touch – the rest settle for gold dust.
Thanks for your interesting comments. It does have a bit of a “if you build it , they will come” feel; big tech is building out capacity to fuel future, projected applications.
Great post with a link to an excellent article! Today’s NYTimes also has an article titled
Companies Are Pouring Billions Into A.I. It Has Yet to Pay Off.
Corporate spending on artificial intelligence is surging as executives bank on major efficiency gains. So far, they report little effect to the bottom line.
https://www.nytimes.com/2025/08/13/business/ai-business-payoff-lags.html?unlocked_article_code=1.d08.4hI4.l-kbLCAs-_B5&smid=url-share
Thanks for the kind words and the link. The discussion of the time lag between insertion of new tech and when it starts to pay off matches my experience. In the 1990s there was a big push for concurrent engineering, using 3-D models to feed the design and analysis of new systems. It was cumbersome and require lots of training to use the tools. A decade later our team reduced a complicated, iterative task from about 12 months to a few months. It took a team of young, tech savvy fresh engineers partnered with some experienced graybeards, to achieve meaning improvement.
Darned good observations Rick. Realizing that there are huge differences between the 90’s dot coms and today’s AI, I wondered if we could have a similar bubble burst. Then I read Ben’s article.
I guess I’ll buckle up the seat belt and keep my hands and arms inside the car until the ride comes to a complete stop.
Thanks Dan. I basically borrowed Ben’s observation of data that he borrowed.
My great curiosity has been whether AI will push us towards plutocracy.
The problem with human govt has always been the people (we’ll do things that we want to do even when it’s clear it’s not the best path). All of this investment in something that essentially wants to replace the person in the process, very interesting to say the least.
Scott, I think many would ay we are already there. There are lot of stories and references to the wealth of Congress.
Current American govt is pretty far away from plutocracy.
I think you’re implying that it’s oligarchy.
If AI was put in charge of redistricting. Give it the criteria, tell it to maximize the number of contested seats. You’d see things in DC change very quickly. Best part, it would embrace expanding centrism such that the most popular things would happen fastest.
I guess the downside of AI is that a bad actor could program it to minimize contested seats while still satisfying other constitutional requirements.
SIGH
Don’t worry Rick they say they understand and are working with the little guy in mind. RIGHT! 🤮
Here is another interesting article by finance blogger Kyla Scanlon on how dependent the whole investment market has become on AI:
https://kyla.substack.com/p/how-ai-healthcare-and-labubu-became
John, thanks for the link. It was a very worthwhile read. It includes some of the same data as the Carlson article. The discussion of the healthcare economy fascinates me. I’ve long wondered how so many healthcare providers can be sustained in a a region. A large regional medical system is building a major center a few miles from us. Is the demand there? You would hope the institutions do their due diligence. The meme economy totally baffle me. Thanks
According to a July 3 article in the NY Times, health care is the nation’s top employer and was responsible for 1/3 of the growth in jobs over the past year. Demand has been driven by an aging population and a decrease in the number of uninsured.
However, cuts to Medicaid and other health care funding are likely to prove problematic.
KFF reported 117 U.S. hospital closures and 68 openings between 2019 to 2023.
Interesting data. In the Philadelphia suburbs, there have been some closures of older, small hospitals, at the same time that larger systems have merged with some local hospitals and opened newer, larger hospital. The large hospital systems that were solely based in Philadelphia, are opening large multi-purpose centers in the suburbs. In general I think this great, bringing high quality and specialized care to where people live.