U.S. investments in AI are skyrocketing---they don’t want to make the same mistake again.

However, the federal government’s ambitions extend beyond semiconductors. The Inflation Reduction Act, also passed in 2022, is stimulating a significant wave of investment in climate tech. And the Biden administration aims to bolster US strengths in the biotech and quantum sectors, too. It recognises that the US has previously failed to capitalise on its early technological lead in some critical areas — telecommunications infrastructure equipment and batteries, for example — and does not want to repeat that mistake.

There is, of course, only so much that Washington can do. But the US private tech sector is independently enjoying a surge of new funding as investors bet big on the transformative power of artificial intelligence. US companies, led by Google, OpenAI, Nvidia, Microsoft and Anthropic, already dominate the field of generative AI. Goldman Sachs estimates that AI-related investment could rise to between 2.5 per cent and 4 per cent of GDP in the US, compared with 1.5 per cent to 2.5 per cent in other leading economies.

“This is a genuine breakthrough,” says Erik Brynjolffson, director of the digital economy lab at Stanford University.

Not only will generative AI sharpen the competitiveness of US companies, it will boost the overall economy, too. While the Congressional Budget Office is forecasting average annual productivity growth of 1.4 per cent over the next decade, Brynjolffson predicts it will be closer to 3 per cent, mostly thanks to AI. “It will roughly double the rate of productivity growth,” he tells me.