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Comment by onlyrealcuzzo | Hacker News Reader

1. People aren't going to take on risk and deploy capital if they can't get a return.

2. If people think they can get an abnormally high return, they will invest more than otherwise.

3. Whatever other money would've got invested would've gone wherever it could've gotten the highest returns, which is unlikely to have the same ratio as US AI investments - the big tech companies did share repurchases for a decade because they didn't have any more R&D to invest in (according to their shareholders).

So while it's unlikely the US would've had $0 investment if not for AI, it's probably even less likely we would've had just as much investment.

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> it's probably even less likely we would've had just as much investment.

I doubt it. Investors aren't going to just sit on money and let it lose value to inflation.

On the other hand, you could claim non-AI companies wouldn't start a new bubble, so there'd be fewer returns to reinvest, and that might be true, but it's kind of circular.

Correct - that's why you'd put it in Treasuries which have a positive real return for the first time in ~25 years - or, as I mentioned elsewhere - invest it somewhere else if you see a better option.

From a certain macro perspective, of no one is going to beat the Treasury, where is the Treasury going to get that money?

they’ll print it of course :)

Sadly, this is exactly what the administration unironically desires. We're arguably in a recession and Trump wants to speed it up to a depression, ransacking the US and making off with the money.

From people who want to lend them money? Or do you mean where is the Treasury going to find production?

Which is an even better argument when you look at how yields have been behaving. AI is sucking the air out of the room.

> 1. People aren't going to take on risk and deploy capital if they can't get a return.

> 2. If people think they can get an abnormally high return, they will invest more than otherwise.

Sounds like a good argument for wealth taxes to limit this natural hoarding of wealth absent unreasonably good returns.

we 1000% need all kinds of wealth taxes. The money's been hoarded for decades and I don't think that money is going to the next generation when the boomers kick the bucket. Inheritance tax, ultra high income tax, taxes on stocks if possible. The government wants to defund food stamps and healthcare while giving the robber barons trillions in tax breaks. Something's gotta give.

Sadly I think a wealth tax would make us all poorer in the end. Most of the wealth held by the top 0.01% is in the form of equities/investments in various industries. Taxing this would literally just suck capital out of the economy. I think taxing real estate holdings is a good idea though (something like Georgeism).

Why is it "unlikely" that the alternative is not US investment by these US companies?

The big US software firms have the cash and they would invest in whatever the market fad is, and thus, bring it into the US economy.

No - traditionally they return it as share buybacks, because they don't have any good investments.

Or, like Apple they just sit on the cash waiting for better opportunities.

It's not just Apple, they all sit on huge piles of cash.

Apple had huge share buybacks.

Companies need to have a healthy pile of cash as a percentage of their expenses.

Apple just has enormous revenues and expenses.

A big dynamic in this is that the business models for two of the biggest players are at stake.

Google is facing a significant danger that its search advertising business is going to just disappear. If people are using AI to find stuff or get recommendations then then aren't using google. Why should a photographer continue to spend $200 a month on ads when their clients are coming from openAI? Especially when OpenAI is using the organic search results. Meta is facing the same sort of issue, if the eyeballs aren't on insta then the ad $$$ go somewhere else.

So if they have money, and can get money, they will invest it to protect their businesses - all of it.

MS and VC's are doing the opposite, they are investing with the idea of taking the attention that Google and Meta currently have, but they are also following the "I'm scared" signal that Google and Meta have put in the market.

Every major consumer facing AI player (besides Anthropic and Apple) is incorporating advertisements into their product currently, or exploring how to, to include OpenAI.

So I’m not as optimistic that Google’s business of advertising is in danger, instead it’s just transforming.

> 1. People aren't going to take on risk and deploy capital if they can't get a return.

This doesn't seem to align with the behavior I've observed in modern VCs. It truly amazes me the kind of money that gets deployed into silly things that are long shots at best.

When you think about all of VC being like 1% of a mostly boring portfolio it makes more sense (from the perspective of the people putting the money in).

>1. People aren't going to take on risk and deploy capital if they can't get a return.

I'm sorry, what? This has happened all the time, and in increasing volleys, since 2008.

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