Economics

More Thoughts about Investing for AI

Posted by Peter on October 7, 2026
Posted in: Artificial Intelligence, Investing. 3 comments

The AI trade is still a very good bet. Increased political uncertainty makes all investments today somewhat less promising than was the case when I wrote about this topic in July 2025.

Regulation of AI is likely to increase over the next 2 years or so, constraining growth somewhat. But AI capabilities have been increasing faster than I expected. I don’t expect a full halt in AI capability advances, and existing capabilities are enough to fuel quite a bit of further growth in AI-related companies. So it’s unclear whether AI revenues will be higher or lower than what I expected in 2025.

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AI Regulatory Capture

Posted by Peter on September 16, 2026
Posted in: Artificial Intelligence, Economics. Tagged: . Leave a Comment

[This rant is directed mainly at people who probably won’t read it.]

Proposals to slow AI development have been criticized as special-interest lobbying. E.g. Marc Andreessen:

One-hundred percent, there’s a regulatory capture element to it. And they’re driving hard for that.

I’ll concede for the sake of argument that AI companies would like regulatory capture.

Dario Amodei, Sam Altman, and Elon Musk are all ten times too ambitious to settle for mainly achieving regulatory capture. Regulatory capture is effective at preserving existing corporate revenue and jobs. It’s a terrible way to colonize Mars or cure all disease. Those CEOs have made it clear that their ambitions are at least as big as colonizing Mars.

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Plan A, by AI-2040

Posted by Peter on July 26, 2026
Posted in: Artificial Intelligence, Economics, Politics. Tagged: . Leave a Comment

The folks who wrote AI 2027 have written a more optimistic narrative, which focuses more on hopes for good policies than on predictions about what policies we’ll get.

Plan A’s narrative seems halfway between a science fiction story and a proposed treaty. Like most science fiction, I expect it to err in the direction of describing the world as more human-understandable and relatable than what we’ll actually get.

The broad outlines come close to the scenario that I analyzed in Financial Costs of an AI Pause?, which is what I predict that fairly competent governments would do.

AI-2040 adds much more detail than I was able to provide, some of it surprising. The devil is in the details.

I largely endorse their advice. The rest of this post will focus on many small doubts about their advice and their predictions about what that advice would produce.

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Compute Tax

Posted by Peter on July 19, 2026
Posted in: Artificial Intelligence, Economics. Leave a Comment

Brian Albrecht’s A compute tax is a REALLY dumb idea disputes a claim that I made in Safety Net When AIs Take Our Jobs about a possible need for a tax on GPUs and similar hardware.

Albrecht and I are answering different questions. He asks what’s the optimal tax for normal times. Whereas I ask what to do if optimal taxes are already collecting nearly the maximum feasible revenue, and there’s still a short-term risk of a debt spiral.

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Weak Links and Limits to Economic Growth

Posted by Peter on July 9, 2026
Posted in: Artificial Intelligence, Economics. Tagged: . 1 comment

I recently attended a talk at Manifest by Chad Jones on the economic effects of AI. Much of it was sensible. Unlike many economists, he gives careful consideration to AI becoming pretty powerful soon. But his main scenarios predict much slower growth than I expect.

His paper Past Automation and Future A.I.: How Weak Links Tame the Growth Explosion clarifies the parts of his talk that puzzled me. This post explores where our assumptions differ.

The fastest scenario that he considers (figure 6 – The Future if AI = ‘Moore’s Law Everywhere’) has economic growth rising to 13% by 2040. Whereas I expect at least 30% growth by then, due to automation happening earlier than he’s willing to imagine.

The key areas where I disagree with him are beliefs about the extent to which growth will be constrained by weak links, which likely stems from differing beliefs about how general-purpose AI will be.

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Financial Costs of an AI Pause?

Posted by Peter on May 31, 2026
Posted in: Artificial Intelligence, Investing, U.S. Politics. Tagged: . 6 comments

I’ve analyzed the near-term economic effects of an AI pause, out of concern for my investments, and a desire to predict how strong political opposition to a pause is likely to be.

My median estimates: The S&P 500 will drop 27.8%. AI subsectors will drop 34-69%. Interest rates will rise at a much slower rate than would be the case without a pause.

The specific numbers depend on some fairly arbitrary assumptions. So please read this post in order to get a feel for how the results depend on the assumptions. I’ve tried to keep the assumptions reasonable, but some of them will prove to be wrong. My most controversial assumptions reflect an expectation that both markets and voters will be surprised at how powerful AI is, mainly in 2027.

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Progress Toward an AI Stock Bubble

Posted by Peter on May 13, 2026
Posted in: Artificial Intelligence, Investing. Tagged: . 2 comments

The tone of AI stock behavior has changed in important ways this spring.

Until March, they were clearly undervalued, and were quietly and somewhat patiently being accumulated by the minority of investors who realized the significance of AI. Recent buying has been less patient, occasionally mildly panicky, and indicates that awareness of AI is steadily spreading toward mainstream investors.

In a normal year, closing the Strait of Hormuz would impact the stock market much more than any other problem. But for the past few weeks AI has clearly been having a bigger impact on the market. Almost big enough for markets to forget about Hormuz. It’s weird that rising oil prices haven’t much hurt non-AI stocks.

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FRI’s Forecast of AI Impacts

Posted by Peter on April 5, 2026
Posted in: Artificial Intelligence, Economics. Tagged: . Leave a Comment

I participated, as a superforecaster, in the Forecasting Research Institute (FRI) Forecasting the Economic Effects of AI survey. They’ve published their results in this 224 page paper.

My prior experience in the Existential Risk Persuasion Tournament led me to expect that the average participant would predict less AI impact than I predicted, but I was still shocked by the extent of the disagreement.

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Safety Net When AIs Take Our Jobs

Posted by Peter on December 31, 2025
Posted in: Artificial Intelligence, Economics, Investing, U.S. Politics. Tagged: , , . 1 comment

I’m analyzing what happens to the US economy in the short-term aftermath of the typical job being replaced by AIs and robots. Will there be a financial crisis? Short answer: yes.

This is partly inspired by my dissatisfaction with Tomas Pueyo’s analysis in If I Were King, How Would I Prepare for AI?.

Let’s say 50% of workers lose their jobs at the same time (around 2030), and they’re expected to be permanently unemployed. (I know this isn’t fully realistic. I’m starting with simple models and will add more realism later.)

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