AI acts key to a quick start and expansion for small businesses

The rapid emergence and spread of AI has become a defining feature of the U.S. economy, of prime interest to Federal Reserve officials trying to understand its potential to reshape productivity, growth, inflation and labour demand.

Among a broad review of the ​Fed launched by new Chairman Kevin Warsh, one panel will look solely at AI and its implications for productivity, a force that can allow the economy to grow faster with less inflation, but also means fewer workers are needed to create the same ​output.

Some Fed officials have already raised the possibility of an AI economy with structurally higher unemployment; other analysts have noted the steady dip in labour's share of national income and questioned if steadily higher returns ⁠to capital are also part of the AI future, a who-wins issue with social and political implications.

Much like when then-exotic new brands such as Yahoo! and America Online fought to connect everyone to the internet, different AI models are now competing for attention and dollars — but with ​offerings that can perform complex tasks, solve problems, or write computer code, not just shop and search the Web.

Investment in needed data centers is driving overall growth and in some cases driving up power and labour costs.

Scenarios around AI range from visions of plenty to mass unemployment, with ​banks, government agencies, the military and more looking to exploit the new tools but also protect from them.

“Markets are confronted with dramatically different competing narratives," Jean Boivin, head of the BlackRock Investment Institute, said in a seminar with journalists on Tuesday.

"We are framing this as scarcity versus abundance…Scarcity is the story of the moment” with the AI investment boom driving up some costs and driving demand for capital.

-Reuters