The business development of artificial intelligence has reached a turning point. UBS deploys virtual research analysts to briefly explain staff on market trends. The chief executive of humanity has warned that AI can wipe out half of its entry-level white-collar work in one to five years, with massive layoffs from companies like IBM, Microsoft, Google and more. Nvidia’s profits and revenues skyrocketed last week, but Maga Politico Steve Bannon warned that AI-related job disruption would become a major issue in the 2028 presidential election.
Given the new research showing that youth unemployment rates may be linked to AI deployments, I am sure he is right. We knew the confusion was here, but all of a sudden you can really feel it. Industry such as finance, healthcare, software and media, like almost all sales and marketing sectors, are at the epicenter of change. But from a geography perspective, the United States is the fastest shifting in ways that could create a major tailwind for American businesses, even if it creates political and social tensions.
American businesses have long been ahead of the board in technology adoption. Expenditures on technology research and development and stronger growth in intangible capital investments, such as industrial design, innovation, organizational structures and datasets, are two major reasons why the advent of the consumer internet caused a surge in productivity in the mid-1990s. The number of new cases increased again in the mid-2000s, with the introduction of iPhones and the development of app economy.
American businesses are also investing in AI. According to a Stanford University survey, in 2024, private AI spending rose to $100 billion, almost 12 times the US$9.3 billion in China and 24 times the US$4.5 billion in the UK. According to researchers at Stanford University, the US-based institution produces 40 “notable AI models, significantly outpacing China’s 15 and Europe’s three.
“The US is not just moving ahead of AI,” said Jim Clark, engineer, founder of New York-based The Future of Employment and Income Institute, which studies AI-based innovation and disruption. “It’s breaking away. Europe, by contrast, is fragmented markets, slower procurement, tougher labor regimes, and more careful than momentum.”
Many companies expanded their plans to deploy Agent AI this summer. This supports an anecdotal sense that conversations with corporate executives have led workers to use AI for more complex research and analysis tasks, not just simple questions and answers.
Donald Trump’s “big and beautiful” budget bill has provisions that prevent states from regulating AI individually. This could lead to yet another productivity difference between the two, reflecting what happened in the 1990s when US companies adopted software and web-based technologies faster.
So far, the US has enjoyed deep structural benefits when it comes to AI deployments, from a labor market that is flexible enough to absorb the disruption, from a tide wave of technology giants with big bets on infrastructure, a fast, hungry startup ecosystem, and a regulatory environment that is largely out of the way. “These can now be moved in a big way, primarily by large and cultural American companies,” says Clark.
According to Apollo’s economic outlook for the second half of 2024, the adjusted surge in corporate deployment and research spending is a dynamic that even China has not seen elsewhere. Since then, it has overturned traditional wisdom, particularly about whether an open source approach will allow the US to continue to lead in AI. I spoke with Taiwanese technology investor Kai-Fu Lee for the past week. Kai-Fu Lee is a Chinese-based company that builds applications from behind Deepseek’s algorithmic model and markets internationally.
Deepseek’s popularity highlights the vulnerability of technology decoupling in US-China. The White House may be able to control the flow of chips between countries, but it is much more difficult for businesses, universities and individuals to stop using open source models or downloading AI apps. Ultimately, it may prefer China’s first open source technology stack.
Still, as pointed out by Lee, author of AI Superpowers, Chinese companies are good at building consumer AI apps, corporate spending is still lagging behind that in the US. “Chinese companies are not used to paying millions of dollars for software.”
Anyone who wins technology, business development encourages the kind of broad productivity gains that will strengthen overall economic growth. AI, in this sense, is one of the few bright spots, except for the possibility of Trump’s trade war, depending on the outcome of the court battle that controls our interests, and can support corporate profits and give investors a reason to stay in American stocks.
However, the speed and scale of AI destruction can also lead to white-collar repulsion. Research shows that the public hopes that it will slow down. A new Oxford Economics survey found that the high unemployment rate among university graduates was due to AI labor alternatives. It could grow as young people can no longer afford rent or consumer goods. What technology offers can also be taken away.
rana.foroohar@ft.com
