It was early November, and the stock market had grown jittery as investors recoiled anew over the enormous bets the nation’s largest technology companies had placed on artificial intelligence.
But the skittishness playing out on Wall Street that day barely registered at the White House. Asked whether he harbored any fears about an emerging bubble, one that could damage the economy if it were to pop, President Trump brushed aside all doubts.
“No,” he quickly replied, “I love A.I.”
For Mr. Trump, there is no risk, only reward, posed by the dawning and disruptive new age of computing. Over the past year, the president and his top aides have fully embraced A.I., and showered its leading corporate backers with money and regulatory support, as the administration looks to supercharge one of the primary areas of growth in an otherwise precarious U.S. economy.
That optimism was on display on Tuesday, after the federal government reported that the U.S. economy grew at an annual rate of more than 4 percent last quarter. Kevin Hassett, the director of the White House National Economic Council, told CNBC that the new data indicated that the president’s broader agenda was working as he touted the signs of a “boom” in A.I.
The administration’s unqualified support contrasts starkly with the more cautious tone struck by economists and even some technologists in Silicon Valley. Many still question whether A.I. might cause significant job losses, at least temporarily, and fret over the speed and methods that have allowed the industry to grow in ways that may not be sustainable and could risk financial havoc.
The White House has largely waved off many of those concerns. Instead, Mr. Trump, who has long viewed the stock market as a barometer of his economic success, has courted and celebrated the soaring stock prices of major technology companies like Nvidia. The stock market once again notched a record on Tuesday, propelled by tech companies with ties to A.I.
“Generative A.I. is a potential game changer for productivity and the economy,” said Glenn Hubbard, who served as chairman of the Council of Economic Advisers during the George W. Bush administration. He described the technology as a “big plus.”
But, he said, that was not to suggest that there were no economic and political constraints — in the ways A.I. is being financed, in the impact it is having on communities and on the jobs that artificial intelligence may replace.
“A.I. is happening rapidly, and we didn’t help people cope with globalization and technological change very well over a 30- and 40-year period,” Mr. Hubbard explained. “We’re probably not going to do it again.”
Mass layoffs, or a ‘great coach’
Policymakers across Washington generally agree that A.I. portends generational change, with vast implications for everything from medical research to warfare. That has helped spark an investment boom in computing, and a burst of new growth for the broader economy, which Mr. Trump has tried to maximize.
Through a series of executive orders, signed over the last 11 months, Mr. Trump has moved to eliminate regulatory guardrails and make it easier for tech companies to build data centers, power their operations, sell computer chips and source critical materials. He has done so under the advisement of David Sacks, a Silicon Valley investor now serving at the White House, who has publicly likened A.I. skeptics to a “doomer cult.”
Mr. Trump has cast the race to develop A.I. as an existential struggle against superpowers, a “fast-paced competition” that can also create thousands of U.S. jobs within the next few years. But his optimism has only quickened a long-simmering debate over the extent to which artificial intelligence may upend entire industries, by boosting the nation’s growth without creating jobs — or, worse, leaving some without work entirely.
Bharat Ramamurti, who served as an adviser on the White House National Economic Council under President Joseph R. Biden Jr., said it was unlikely that A.I. could be “fabulous for the economy” while still leaving the labor market completely unharmed.
“One comes with the other,” he said.
For now, economic data reflects no mass firings because of A.I. But a growing body of research still hints at the ways the technology may reshape the labor force, particularly for younger Americans, including recent college graduates.
One study from the Federal Reserve Bank of New York found that companies embracing A.I. in the region had mostly opted to retrain their workers, rather than let people go. More striking, however, was the slow rate at which these companies were hiring new workers. By August, roughly 25 percent of respondents said they planned to reduce hiring in the next six months, especially for college-educated positions.
The New York Fed’s report aligned with recent data from researchers including Erik Brynjolfsson, a professor at Stanford University, who found that A.I. adoption disproportionately reduced employment for workers ages 22 to 25 in industries set to be highly affected by the technology.
At the White House, Mr. Hassett has frequently contended that A.I. will augment, not replace, human labor, essentially functioning as a “great coach” for workers.
But Mr. Hassett has largely rejected the idea that A.I. could greatly swell the ranks of the unemployed, declaring at one point this month that he did not “anticipate mass job losses.” Other White House officials have echoed that view, and on Tuesday, one of the president’s aides appeared to encourage workers at risk of displacement to seek other employment, perhaps in factories or manufacturing.
“In an age of A.I., where all the white-collar jobs are going away pretty damn quick, I think maybe it’s a good time for people to think about having good blue-collar jobs,” Peter Navarro, the president’s top trade adviser, told CNBC. “That used to be how America prospered.”
How A.I. affects employment has attracted heightened attention at the Federal Reserve, which is supposed to foster a healthy labor market while keeping inflation low and stable.
In an interview, Lisa D. Cook, a Fed governor, said that A.I. could have a “positive effect” on the central bank’s efforts to combat inflation. That would depend on recent productivity gains continuing to mount rather than petering out.
“I’m thinking about the history of technology and of invention and innovation, and I can see both pluses and minuses,” Ms. Cook said of A.I.’s economic implications more broadly. She added that she would be keeping an “eye on what the impact will be on the labor force.”
“We’re watching this very, very closely,” she said.
So, too, are other Fed officials, including Christopher J. Waller, a governor who warned, in a speech in October, of a “time inconsistency between the costs and the benefits” for A.I.
“The disruptions come first; the benefits take time,” he said. “When a new technology appears, it’s always easier to see the jobs that are likely to disappear, but it’s much harder to see the ones that will be created.”
‘A lot of froth’
Roughly three decades ago, the U.S. government found itself at another digital inflection point, grappling with the unpredictable ways that technology could reshape the economy. It was at the dawn of the internet age, and with the economy running hot, the Fed raised interest rates sharply into 2000.
That ultimately contributed to the popping of the dot-com bubble, which exposed the unsteady economics of the early internet. The bursting killed now-infamous brands like Pets.com, sent financial markets tumbling and seeded some of the conditions that would later tip the U.S. economy into a recession.
Some economists now see troubling similarities between that downturn and the current trajectory of A.I. While today’s technology giants, including Facebook, Microsoft and Google, are vastly more profitable and diverse businesses than their early internet predecessors, some have still incurred substantial debts and struck unusual financial arrangements to finance the data centers that power automation.
Those three companies, which belong to a group of tech giants known as the hyperscalers, issued more than $121 billion in debt this year in part to finance data centers, according to a December report from BNY Mellon. Their behaviors and stock prices create conditions that “rhyme with previous bubbles,” analysts at Goldman Sachs wrote in October, acknowledging that the situation with A.I. was not exactly the same, at least for now.
“In the near term, there is a lot of froth in A.I.,” said Mr. Hubbard, who acknowledged that the investments in the early days of the Web nonetheless paid off, even once the downturn subsided. “That may happen here too.”
Still, the White House has expressed little concern with the investments placed by A.I. companies or the ways in which they have financed them. One official, who spoke on the condition of anonymity, said the only risk to the markets would actually be the imposition of any guardrails on A.I., because such restrictions could slow economic growth.
This month, Mr. Trump signed a directive that restricted states from imposing their own regulations on the technology, a move that quickly drew bipartisan opposition. Some states had sought to pass laws targeting generative A.I., which can create text, photos and videos from prompts, out of a concern that the realistic content could prove harmful to users.
“The risk of a bubble rises if the policy environment were more unfavorable to the fundamentals of the industry and the economywide demand that is fueling its growth,” the White House official added.
The Trump administration has publicly maintained that it will not come to the rescue if the technology companies investing huge sums in artificial intelligence experience financial turmoil. The issue arose after an executive at OpenAI, the maker of ChatGPT, mused aloud about a possible federal “backstop” if the tech sector experienced turmoil, at a moment when the company is facing questions from investors about its finances.
That prompted Mr. Sacks to publicly declare on social media: “There will be no federal bailout for AI. The U.S. has at least 5 major frontier model companies. If one fails, others will take its place.”
Darrell M. West, a senior fellow studying A.I. at the Brookings Institution, said it would be “unrealistic” for the government to do nothing if the nation’s most profitable technology giants faltered. If their debt-laden data centers sit unused, and tech companies see staggering shortfalls, “it could snowball from a minor crisis to a major crisis.”
But Mr. West said that, for now, Mr. Trump had spent much of his time “juicing the A.I. market, talking it up, taking leaders on every foreign trip that he has, deregulating A.I. rules” and discouraging states from pursuing their own — actions, he said, that would drive up the risk “dramatically.”
“A.I. is too big to fail, so it’s really important that government learn the lessons of past bubbles,” he said. “We don’t know if we’re in a bubble, because no one ever knows until it’s too late, but there are certainly many warning signs out there.”
Tony Romm is a reporter covering economic policy and the Trump administration for The Times, based in Washington.
The post Chasing an Economic Boom, White House Dismisses Risks of A.I. appeared first on New York Times.
