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Kevin Warsh made it clear at Jackson Hole: artificial intelligence could fundamentally change the growth potential of the United States. His first speech as Chairman of the Federal Reserve set a rather radical framework—he described our era as a “tipping point in history.” Not a small statement, coming from the head of the Fed.
But here’s the problem. The Fed still doesn’t know when productivity gains will truly materialize, how employment will evolve, or which companies will benefit. Warsh himself admitted this. And because these answers are missing, AI has not yet influenced interest rate decisions. We are in an uncomfortable in-between: everyone sees the potential, but no one can really measure it.
AI Spending Soars at Breakneck Speed
The investment figures are already here. Corporate spending on equipment and intangible assets rose by nearly 9% over the past year—their fastest pace since 2021. More than half of this growth comes directly from AI-related infrastructure. Data centers, chips, networks: the concrete of the AI boom, essentially.
And Warsh cited another striking figure. The two leading AI labs report annualized sales exceeding $100 billion, an increase of more than 500% in one year. These data come from reports cited by Warsh himself, not from Fed-published accounts—an important distinction. But the signal is there, raw.
It’s still unclear if these figures will hold. The Fed is monitoring what it calls the “second derivative” of investments—in other words, not just the level of spending, but whether their pace is accelerating or slowing. A slowdown would mean that companies are starting to revise their profitability expectations. That would be a strong signal.
A Headache for Monetary Policy
Warsh pointed out something structurally complicated for the Fed. If AI becomes a real “factor of production”—in the economic sense—it could accelerate growth without causing uncontrolled inflation. Supply increases with demand, prices remain stable. Theoretically beautiful.
But a calibration error can be costly in both directions. Underestimating AI’s productivity gains, and the Fed keeps rates unduly high, slowing an economy that could run faster. Overestimating these gains, and the central bank lets demand run wild, with price pressures following. Both scenarios are plausible. Warsh doesn’t decide.
A group of experts is currently working within the Fed on AI-related employment and productivity issues to inform future monetary policy decisions. But this work has not yet impacted current choices. They’re preparing the tools while the train is running.
Who Will Really Win—and Who Will Miss the Train
The increase in AI spending does not guarantee that everyone will benefit. Warsh stated this bluntly. Owners of rare assets—advanced chips, data centers, technical infrastructure—could capture a significant share of the generated revenue. It’s the classic risk of a technological revolution: gains quickly concentrate among those who control the bottleneck.
Companies using AI could reduce their costs or increase their production. End users might benefit from more affordable or efficient services. But in between, there are entire sectors that risk being left out if adoption is uneven.
Regarding employment, Warsh has clear concerns. AI could complement some human tasks or replace others—it depends on the fields and the pace of adoption. Some skills will become obsolete. Others will see their value rise. But the speed at which all this happens makes forecasting very difficult, even for an institution with the Fed’s resources.
And there’s a technical admission Warsh slipped in: the Fed does not yet have the statistical tools needed to fully measure AI’s impact on key economic indicators. Not the data, not the models, not the metrics. Monetary policy decisions must therefore be made with caution, in a fog that is not about to lift. The annualized sales of the two major labs exceed $100 billion—but the Fed still doesn’t know what to do with it in its models.
Frequently Asked Questions
Why doesn’t AI influence the Fed’s interest rates yet?
According to Kevin Warsh, the Fed still lacks reliable data on the timing of productivity gains, employment evolution, and which companies will truly benefit from AI—without these answers, AI does not yet weigh in on rate decisions.
What investment figure did Warsh cite to illustrate the AI boom?
Warsh cited a nearly 9% increase in spending on equipment and intangible assets over one year, with more than half attributed to AI infrastructure, and annualized sales exceeding $100 billion for the two leading labs, up more than 500% in one year.
What is the Fed specifically monitoring in AI investments?
The Fed is following the “second derivative” of investments—whether their pace is accelerating or slowing—to detect if companies are starting to revise their profitability expectations related to AI.
Why It Matters
The surge in AI investment reflects broader market sentiment around technological advancements as potential drivers of economic growth, especially in the context of uncertain monetary policy. Warsh’s comments highlight a pivotal moment where the Federal Reserve must reconcile the transformative potential of AI with its challenges in forecasting productivity and employment outcomes. This ongoing dialogue between innovation and economic stability will be crucial for investors as they navigate the evolving landscape of both traditional and tech-driven markets.
