AI Spending Anchoring Macroeconomy: Board’s Gallagher

AI Adoption and Productivity - The industry anticipates 2026 as a critical year to demonstrate economic upside and productivity gains from AI investments [1][3] - Currently, approximately 55% of American workers report using AI, but this broad adoption has not yet translated into significant productivity improvements reflected in government, private, and university studies [2] - The industry needs to see meaningful depth of AI adoption to validate underlying economic fundamentals by 2026, potentially reflected in margin improvements for healthcare companies and financial institutions [3] - Earnings releases will be the first place to see the impact of AI, but the industry needs to see them show up in a meaningful way to justify valuations [4] Economic Impact of Investment - Capital expenditure (CapEx) spending has served as a macroeconomic stabilizer, surpassing expectations in 2025, even amidst stagnation in other economic sectors [6] - A significant pullback in CapEx spending could have broad-based economic implications extending beyond the tech sector [7] - Economic growth in 2025 is largely dependent on substantial investment plans from a few major tech companies [5] US-China Technology War - Despite trade uncertainties with China, US businesses have generally continued to perform well [8] - Increased decoupling with China could lead to reduced revenue and R&D, with potentially extensive economic implications [9] - Competition dynamics resulting from decoupling could potentially create a win-win situation for the US [9] Market Valuations and Investment - The market is questioning valuations, yet some companies are rising without fundamental support, such as Tesla potentially reaching a new record high since December 2024 [10] - With the end of a rate cut cycle, cash yields become less attractive, requiring careful monitoring of whether investments are directed towards actual infrastructure or alternative investments [12] - Elevated valuations need to be meaningful, with the proof being in the pudding [13]