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In my framework, the entire economic effect of artificial intelligence is strictly divided into two types of monetization.
Type 1 is when AI does existing things faster, cheaper, and more accurately. This is the notorious efficiency play. A neural network writes code instead of a junior developer, an algorithm optimizes warehouse logistics, or a smart chatbot leads to the firing of an entire customer support department. In this case, AI acts as a brilliant apprentice.
It does not expand the economy. It simply helps win a fight in the old sandbox.
Yet Type 2 is the magic of new value. This is a situation where AI births an entirely new range of products and services that physically did not exist in nature before this technology, forming new markets from scratch. Remember the iPhone in 2007. It did not simply replace the camera and the calculator.
It created the mobile app economy. It built a multi-billion dollar industry that simply was not there the day before Steve Jobs stepped on stage.
And here is where it gets interesting. This is exactly what investment bank analysts prefer to keep quiet about in their morning briefings.
Macroeconomics of AI: The Type 1 Limit and the Illusion of Growth
So let's descend from the clouds of corporate presentations to the gritty reality of macroeconomics. There is a basic, ironclad law that no neural network can bypass: GDP by income always equals GDP by expenditure. The pie of consumer demand is physically limited by how much cash is sitting in the pockets of the population.
Not a single cent more.
Now, watch closely. What is the Type 1 monetization that Big Tech is currently so proud of actually doing?
Suppose a smart AI agent fully automated the process of booking complex flights for you. The service became more convenient. The corporation increased its margin by firing a live call center operator who sat somewhere in Mumbai or Warsaw.
Sounds like a victory for progress, right?
But what happened from the perspective of the global balance? You, as the end consumer, did not start spending more money on tickets. Your check remained the same. The total size of the booking services market did not grow by a single inch.
The bottom line is that Type 1 monetization cannot pull the global economy upward for the simple reason that it is a classic zero-sum game.
It is just moving money from the right pocket to the left. Yes, it raises labor productivity significantly. But just because a thousand smart apps have settled in your smartphone does not mean your monthly budget has increased a thousand times. You will just choose the best one.
The rest will vanish.
irculation and settles as net profit on the accounts of a Microsoft or Google in the United States.
To put it in perspective: if a European company previously paid salaries to a hundred accountants in India, that money fed local economies, bought goods, and stimulated global trade. Today, that same company might buy an AI subscription from an American tech giant to do the exact same job. The Indian accountants lose their income, while the US corporation absorbs that cash flow. Yes, the United States economy wins massively from this Type 1 optimization, successfully solidifying its technological and financial hegemony. But for the global GDP, it is not a net gain; it is merely a redistribution of existing wealth.
The American economy swells from this, certainly. But for the total global GDP, it doesn't move the needle. The pie does not grow.
Growth based exclusivelyetization has such rigid limits, then where do these astronomical, mind-bending quarterly revenue figures in the semiconductor sector come from? Why is the market cap of those who make the hardware piercing the stratosphere?
And here we arrive at the main trap of the current moment. To understand it, we need to introduce the concept of "Type 1.5" monetization.
The market for data center chips where NVIDIA holds absolute market leadership and AMD desperately tries to bite off its share is indeed a new sales market. Previously, the economy simply did not require such volumes of computing power. Graphic processors are selling like hotcakes. However, it is vital to understand the nature of this celebration.
This banquet is not financed by the end consumer.
The current explosive growth of the AI industry is based exclusively on the investment component corporate capital expenditures. Technological giants are pouring hundreds of billions of dollars into infrastructure, fearing they will lose the arms race. For NVIDIA, this is demand that looks like Type 2.
But in its essence, it is a purely B2B relationship. It is an investment phase that has no direct exit to the wallet of an ordinary person.
Investment is always an advance against the future. It cannot hang in a vacuum.
Sooner or later, the giant spending of corporations on server racks must be justified through the consumer component. The investment wave must break against the shore of real demand. And the problem which is now making many eyes on Wall Street twitch is that the infrastructure is being built at a breakneck pace, but the end consumer product capable of paying back these trillions is not yet visible on the horizon.
If AI remains just an ex
The picture is quite sobering.
Take Microsoft and Google. They are the unconditional and seemingly unsinkable hegemons of Type 1 monetization. They maniacally embed generative algorithms into every digital appliance, every line of corporate code, and every search result.
They are desperately cannibalizing their own long-established revenues just so the user doesn't leave for a competitor. Is it impressive? Yes. Does it expand the global economic pie? Not by an iota.
Amazon, with its AWS, has settled comfortably in this food chain. It acts as the gray eminence of Type 1 infrastructure, helping thousands of other corporations cut costs and fire middle-management clerks in batches. It is the perfect corporate cleaner.
Meta is a different story. By releasing open-source code to the masses, Mark Zuckerberg is effectively seeding other people's gardens. He hopes this chaotic ecosystem will birth the sprouts of Type 2, which can then be elegantly integrated into virtual reality.
And make no mistak
You need to look at the wallet, not the teraflops. It requires returning to the most fundamental questions of economics: What to produce? How to produce? For whom to produce? The ultimate driver of the economy is the product. Therefore, an investor must look beyond financial statements and evaluate the product itself and its potential to conquer entirely new markets.
First, look for a radically new range of products. True Type 2 arises only where an ordinary person willingly and even with a certain enthusiasm expands their monthly budget. They do this because they were offered something without which life now feels dull.
Let's look at what is already working right under our noses.
Consider the premium subscriptions for advanced large language models. Those notorious twenty dollars a month for access to a smart chatbot. This is pure, distilled Type 2 monetization.
Admit it: until recently, an expense item called "personal cognitive assistant" simply did not exist in the budget of the average household. It wasn't there! People pull out their credit cards and pay this money not instead of buying bread or paying for Netflix.
They pay it on top of their old, habitual spending.
A completely new service appeared. A brand-new, previously unseen sales market formed from scratch.
And you know what? It works. People are ready to shell out for something that gives them a new superpower. The problem of the industry right now is not that Type 2 doesn't exist as we see, it does but that for the payback of themplex and seemingly purely corporate service, a living person must stand at the very end of this food chain. If an investment pays off only because one corporation helped another corporation reduce costs it is an evolutionary dead end. It will hit the ceiling.
Finally, there should be no substitution effect. Type 2 innovation must be additive. If a new service simply eats your old product to survive on the market, it is just running in place at your own expense.
Conclusion: A Pragmatic Look into the Future
It is time to draw the line.
The hundreds of billions of dollars being ruthlessly burned in the furnaces of new data center construction have economic meaning in only one single case. They are justified if they eventually become the foundation for a new consumer era.
Don't get me wrong. The next powerful wave of growth in the AI market will definitely happen. A colossal leap awaits us. But it will be qualitatively, fundamentally different. It will no longer be a hardware race.
Investors will have to harshly shift their lens.
The current position at the top of the food chain with a trillion-dollar capitalization gives Big Tech absolutely no indulgence for the future. Leadership in infrastructure does not guarantee leadership in innovation.
History teaches us that technological explosions often come from nowhere, and current leadership does not guaranteeext golden goose that explodes consumer demand might be created not by a clunky giant from Silicon Valley, but by some garage startup that finds a way to pack a neural network into a new format of being.
Keep your ear to the ground. Evaluate companies not by how many processes they were able to automate, and not by the number of purchased servers. Evaluate the product itself. Search for those who create not just "smart code," but new, tangible sales markets. If you want to find an asset that will grow a thousandfold over the next 20 years, you need to find the equivalent of Microsoft in the 1970sa visionary that creates a completely new expense category for the population. Hedge your infrastructure risks and remember: real growth begins when someone figures out how to make millions of people happily pay for something they didn't even suspect existed yesterday.
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