Artificial intelligence vs natural greed

Every market puts a price on something. It might be a sack of apples, a day's catch of fish, a hand tool, or a financial instrument that stands in for almost anything you can name. Whatever changes hands, the people doing the trading are placing a bet, and the price they settle on is really a statement about the future: how badly they want what will come, or how much they fear it, this quarter or ten years out.

For about a century now, technology has been where that future gets priced hardest. Each of its waves has landed with more force than the previous one and has then reshaped more of the economy, and the urge of market participants to own a piece of it today has grown right alongside. The trouble is always timing. Investors tend to be right that the technology will matter and wrong about how long it will take to really matter, so they price today the cash flows, wealth generation and overall impact that will materialise later.

This paper highlights the fragilities underneath the current mania, artificial intelligence, and how its main players are interconnected. Four economies sit at the centre: the United States, South Korea, Japan and Taiwan. The United States produces more energy than any other country, takes the largest share of the world's investment flows, and prints the currency everyone else settles in. The other three sit in a much less comfortable situation: they import almost all their energy, their currencies are sliding, they are importing inflation they can ill afford, and they are where the money chasing AI has crowded in hardest. The boom is manufactured in South Korea, Japan and Taiwan; but the capital that fuels those markets comes mainly from abroad, and so does the demand for the hardware they produce. All of these are vulnerabilities.