After the Fed: Jackson Hole Supports AI Buildout and Role in the Economy

Market participants charged with fact-finding on the AI buildout

In a video analysis, I highlight the recent Jackson Hole speech given by Fed Chairman Warsh on August 28th. I peruse his top-level comments on AI and the economy, the unknowns raised, his policy approach and economic outlook.

Fed Chairman Warsh emphasized that market participants themselves should be tracking real information across the economy. This is exactly what analysts, media, think tanks, and universities are doing.

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Edited transcript follows with background references.

AI and the Economy

The chairman noted that artificial intelligence — despite being an old concept — is advancing faster than even its biggest supporters and voices predicted just a couple of years ago. That’s consistent with what is being observed: the AI trade just keeps going, but is built on data headed the right way.

He also pointed out that ever-expanding pools of capital are pouring into AI-related infrastructure of all kinds. This ties back to the idea of broadening investment that I’ve written about on Seeking Alpha and elsewhere — big finance has emerged in the game, beyond the hyperscalers. He also referenced a kind of “hyper Moore’s Law,” with scaling laws reshaping both the method and the speed of innovation.

This echoes something I discussed in the context of AI diffusion a couple of years back. Everyone talks about Moore’s Law, but scaling laws are now the more relevant framework — and even those playbooks are being rewritten in real time.

(Interview fall 2025 with semiconductor expert Tyson Tuttle and San Antonio Fed board member about Moore’s law and new developments)

Notably, the chairman mentioned that annualized token sales from the two leading labs, likely OpenAI and Anthropic, have topped $100 billion, a 500% year-over-year increase.

(Add to that, ChatGPT just announced its ads business has surpassed a $1B annualized run rate, less than 200 days since launch.)

Regarding the $100 billion in revenue, Warsh raises real questions: will we see a sustained rise in productivity across the economy, and when? Will next-generation models demand more capital, or will models themselves enable a more capital-light path? It’s still unclear where returns on capital will land, and when.

The Big Unknowns

Much of the analysis I see on [crowd-sourced] Seeking Alpha is grappling with exactly these questions — where the money is flowing, where the capex is going, and who benefits. The chairman also raised the question of who captures the initial benefit: owners of scarce assets like the AI labs, chip makers (which have been on a tear), energy producers (major beneficiaries now and in the future), and cloud providers. There’s also the question of how much value shifts downstream to businesses and consumers — which is already starting to happen.

In the biggest-picture sense, market structure — how value shakes out across all these sectors — is one of the largest unknowns. We’ve heard 2026 capex figures of roughly $725 billion for the top four hyperscalers alone.

[Discussion about chart on capex drawn from an April 2026 study.]

Google and Amazon are taking the lion’s share, with Meta and Microsoft following; Meta is actually outspending Microsoft. Oracle is also in the mix, and interestingly has stayed fairly steady on this measure going back to 2020.

The Fed’s Policy Approach

The chairman described a measured policy approach. Rather than telegraphing exactly what’s coming, he wants to preserve room to step back and form a more solid view before committing. Warsh also mentioned a new task force on productivity and jobs, meant to feed the intellectual groundwork to policymakers going forward.

More broadly, he emphasized that market participants themselves should be tracking real information across the economy. I’ve noticed that this is exactly what analysts, media, think tanks, and universities are already doing. There’s a growing wave of new entrants into this space as information providers and analysts, and that’s only going to continue.

[Chart about compute capacity and market share discussed]

Economic Performance

The chairman noted being impressed with economic performance, which appears to have strengthened. Fourth-quarter growth in equipment and intangibles investment has been the highest since 2021 — when the pandemic was letting up — at 9%. AI has contributed roughly 20% of S&P profit growth over the past year; he attributes more than half of this year’s capex growth to the AI buildup. While hyperscalers account for much of that, it’s showing up in other sectors too.

[I discuss chart on usage from Claude data]

Inflation: The Big Focus

Inflation remains the chairman’s central concern — something I discussed in a video about a month ago. It’s running above target, and commodity prices have been part of that story. This pressure looks likely to persist over the next quarter or two, or three or four — it’s hard to say. That raises the chance of a future rate hike.

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As AI Buildout Continues, Inflation Rebalances Equations

Al Value

Specifically, from my research, a Stanford study offers useful context here: the value AI delivers to consumers grew 54%, reaching $172 billion by early 2026, up from $112 billion the year before. That value comes from both cost savings and revenue generation across a few key areas (not exclusively) — customer support (14%), software development (26%), and marketing (50%). Marketing in particular is benefiting on both fronts: new revenue streams and reduced costs, some of it from the same shift from automation to augmentation reflected in the Claude usage data.

The same study noted a key milestone: on July 9, 2025, Nvidia became the first $4 trillion public company. As of the summer of 2026, it has crossed $5 trillion in market capitalization — a striking data point.

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Closing Thoughts

Pulling from the chairman’s speech: economic performance is good, but this is new territory with a lot of unknowns. While gains from AI are spreading, we don’t yet know how that plays out over time. Inflation is the one to watch, and a potential rate hike.

Commodity markets bear watching too — as we’ve seen with oil prices amid the Middle East situation, Russia, and the related supply-chain effects. The Iran-Hormuz situation has escalated again today.

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