The AI-driven capex cycle might be the biggest investment story of the past century. The five largest hyperscalers were on track to spend around $800 billion on AI infrastructure in 2025, and as a share of U.S. GDP, AI capex has already eclipsed the dot-com boom of the 1990s. Chips are at the center of the AI frenzy – the same chips that also guide precision munitions and power satellite communications. In pursuit of a strategic advantage, nations are racing to shore up critical supply chains and achieve dominance in the economic arena. How will industrial policy&#x27;s reemergence influence investment opportunities and global capital flows? For a closer examination of industrial policy&#x27;s risks and rewards, PGIM&#x27;s Daleep Singh talks to Mike Schmidt, Distinguished Visitor at Princeton University&#x27;s Griswold Center for Economic Policy and former Director of the CHIPS Program Office (CPO) at the U.S. Department of Commerce. The discussion covers topics including: A framework for employing industrial policy effectively Economic resilience and strategic dominance Opportunities and challenges in ramping up U.S. chip production Recent industrial policy actions and their market impact How to prepare supply chains to withstand geopolitical weaponization or unexpected shocks

Chip Craze: Framing Industrial Policy for the AI Era

The Outthinking Investor with Daleep Singh

Welcome to PGIM's The Outthinking Investor, exploring the forces shaping global markets, past, present, and future. Join Daleep Singh as he talks to economists, policymakers, technologists, and veterans of global financial markets to explore what could happen next and why it matters. Now, over to Daleep.

Daleep Singh It's not exaggeration to say the AI CapEx cycle is the biggest investment story of the past century. The five largest hyperscalers, they're on track to spend almost $800 billion on AI infrastructure this year. Most analysts say that number will exceed a trillion next year. And as a share of US GDP, AI-related CapEx already exceeds the peak of the late 90s internet boom. It dwarfs the CapEx spend on the Eisenhower Interstate Highway System.

Daleep Singh The Apollo Space Program, and the Shale Revolution. Only the railroad build-out rivals the AI binge. And even that may not be true for long since today's AI CapEx depreciates in years, not decades. And at the center of the AI CapEx boom are chips. They represent anywhere from 25 to 50% of the cost of an AI training cluster. The same chips that power frontier AI models also guide precision munitions.

Daleep Singh Power satellite comms and determine whether a military can see and act faster than its adversary. So this goes well beyond the economic exposure, which is itself staggering. The national security stakes are potentially existential. Daleep Singh And whoever controls the leading edge of chip production, therefore doesn't just have an economic edge. They have an overwhelming strategic advantage. And it's why governments have been in a race to shore up their supply chains.

Daleep Singh And here's the problem. Daleep Singh And here's the problem. Legislating industrial policy to shore up supply chain resilience and executing.

Chip Craze: Framing Industrial Policy for the AI Era

Read the full transcript

The candid version is on a podcast,
not the earnings call.

Chip Craze: Framing Industrial Policy for the AI Era

Read the full transcript

The candid version is on a podcast, not the earnings call.

The candid version is on a podcast,
not the earnings call.