Weekly Wrap: Good News for the Economy, Bad News for Big Tech, and Terrible News for Motherhood
Welcome back to Friday!
This week left us feeling a bit “overwhelmed” by the myriad of complex topics available for our Breitbart Business Digest Weekly Wrap. In a bid to help us articulate the current state of the economy, we sought advice from our AI assistant, Tariffista. The outcome? Well, it turned out to be less helpful than anticipated. According to Tariffista, the economy is “empathetic, creative, and an animal lover.” So, I guess we’ll just have to stick to our usual methods.
Let’s jump right in!
The Economy Is Growing Rapidly—and It Isn’t All AI
In the third quarter, the economy grew at an impressive annualized rate of 3.4 percent, marking an acceleration from the previous quarter and reflecting the best growth in a year. Real final sales to private domestic buyers—a solid indicator of domestic growth—rose at a 4.9 percent pace, the best since the pandemic recovery distorted figures in the second quarter of 2021.
However, the progressive critics quickly dismissed this news. It’s all fake and AI, they insisted.
Economists suggest that because AI-related spending is becoming prevalent, the strong GDP growth may not truly represent the economy, as the Guardian stated.
This is quite the odd perspective. They implied that GDP isn’t an accurate reflection of economic health due to the focus on AI investment. It’s almost as if the idea of “some economists” saying this—though lacking concrete attribution—makes it a valid claim. It’s funny how some economists seem to always find something to say, often quite ludicrously. Yet expecting the Guardian to actually cite someone is a bit much.
But let’s be clear: this viewpoint is pretty off-base. Even if we disregard AI investments, consumer spending contributed 2.52 out of the 3.4 points of growth in the quarter, revealing that the economy remains strong without AI. Even if you look at the tech side of things, growth stands at roughly 2.5 percent.
The AI Boom Is Real
So, how substantial is this AI boom? Nonresidential fixed investment, covering business expenditures on structures, equipment, and intellectual property, grew at a notable 12.7 percent annualized rate in the third quarter, contributing 1.78 percentage points to total GDP growth.
Equipment investment saw a remarkable surge of 20.9 percent, adding 1.16 percentage points to the growth. Just in computers and related equipment, there’s an approximate contribution of around seven-tenths of a percentage point, highlighting the significant scale of computer infrastructure spending.
It’s a pity we can’t produce all this domestically; had we managed to keep our semiconductor capacity here, growth would probably be even stronger. Instead, we opted to export that capacity—and much of our tech expertise—to Asia, which has left us short on both the talent and infrastructure needed to meet demand. Consequently, net exports reduced GDP by 3.32 percentage points, as a record share of imports stemmed from capital goods.
Marissa Mayer’s AI Babysitter
Sometimes, it’s curious how the tech industry has managed to alienate so many Americans, making AI seem less favorable than inflation. Then we come across a profile of a tech leader, and it all makes sense.
The New York Times recently covered Marissa Mayer, previously the CEO of Yahoo and a pioneering figure at Google, who was their first female engineer. She’s now promoting Dazzle, her new AI product that analyzes pictures from your camera roll to provide answers and perform tasks—a bit unsettling, if you ask us.
Mayer seems to think it’ll resonate with women, sharing a moment where her daughter was preparing to turn 10. The teacher requested three bullet points about what makes her special, and Mayer, overwhelmed by the choices, turned to her AI assistant, Dazzle, for help. Within seconds, Dazzle suggested, “Your daughter is empathetic, creative, and an animal lover.” Mayer found it to be “perfect.”
It’s hard to believe someone would find writing a mere three bullet points so complex when AI can churn out cliché responses so easily.
No wonder there’s a sense of unease surrounding the technology being touted by individuals like this.
People Are Worried About AI Spending
That GDP growth has to come from somewhere, right? This week, investors got anxious about a significant portion of that growth being linked to companies they viewed as reliable sources of profits.
On Thursday, Alphabet’s stock dropped nearly 13 percent, marking its worst day since 2004 and wiping out approximately $482 billion in market value. Around the same time, Amazon’s quarterly results revealed revenue and profit misses, negative free cash flow for the second consecutive year, while still planning on $220 billion in capital expenses this year. The stock fell by about 1.5 percent on Friday, adding to a 4 percent loss from Thursday.
Intel fared even worse. Weak guidance related to tepid PC sales, rising memory costs, and a plant shutdown in Israel sent its stock spiraling down by around 29 percent—the most significant drop since 1974.
Though these might seem like similar narratives, they have distinct underpinnings. Alphabet and Amazon’s challenges largely revolve around the costs associated with AI investments. There was once a time when investors celebrated tech firms investing their cash back into their operations, considering that dividends hinted at a lack of future investment. Yet now, as these companies remain quite profitable, the escalating investment expenses are raising concerns.
On the other hand, Intel is having a different experience. It supplies processors for the AI surge, and that part of the business is thriving—its stock rose about 150 percent this year. However, it’s also involved in the PC market, which faces difficulties. The demand for compute power is shifting to data centers rather than personal computers. As such, there’s a looming question: will the growth from data centers merely detract from PC growth, rather than contributing positively?
“Market participants are becoming somewhat more discerning in their capital allocations,” Fed Chairman Kevin Warsh observed just before the major losses began.
Breitbart Business History: The Great Rally of 1929
On October 30, 1929, the stock market experienced one of the most significant rallies in American history following John D. Rockefeller, Sr.’s announcement, stating that he believed the country was fundamentally sound and that conditions didn’t justify the destruction of values witnessed on the exchanges during the previous week. He had been buying solid stocks for days.
The Dow Jones Industrial Average surged 12.3 percent, an astonishing one-day gain that ranks among the largest ever. The next day, October 31, stocks jumped another 5.8 percent. After the disheartening losses on Black Thursday and Black Tuesday, Wall Street appeared to be making a comeback!
Investors were assured that the panic from those Black days had created a once-in-a-lifetime buying opportunity. Surely, the worst was over. After all, American businesses were still producing goods, consumers were still spending, and the country’s long-term outlook was bright. Why wouldn’t stocks bounce back?
But history tells a different tale. The Dow ultimately lost nearly 90 percent of its value from its September 1929 peak to its low in July 1932. Those who bought into the perceived recovery watched their fortunes vanish as the American economy sank into the Great Depression.
