US Federal Reserve Chair Jerome Powell said on Wednesday that artificial intelligence is unlike the dotcom bubble of the 1990s, as companies leading the AI race are contributing to economic activity.
"This is different in the sense that these companies, the companies that are so highly valued, actually have earnings and stuff like that," Mr Powell told reporters after the US central bank lowered interest rates by 25 basis points.
He said the dotcom-era firms that went bust were more "ideas rather than companies", while today's AI companies have business models and profits. He also said that investment in AI equipment and infrastructure is a source of growth in economic activity.
Mr Powell did not mention any company by name.
One analysis from JPMorgan released last month showed AI-related capital expenditures contributed to 1.1 per cent of economic growth in the first half this year, passing consumer spending as the driver of expansion. Hyperscalers are also projected to allocate $342 billion to capital expenditures this year, the report said.
Earlier on Wednesday, chip maker Nvidia became the first company in the world to reach a market value of $5 trillion on lofty AI hopes.
Meanwhile, Qualcomm joined the AI data centre race this week when it announced the AI200 and AI250 chips, while also unveiling Saudi tech startup Humain as its first major buyer.
Microsoft topped $4 trillion in market value after it reached a deal with OpenAI on Tuesday that would allow the ChatGPT maker to restructure as a public benefit corporation, or PBC.
Microsoft will hold a stake of $135 billion – or 27 per cent – in the OpenAI Group PBC that would be controlled by the OpenAI Foundation. Microsoft has invested more than $13 billion in OpenAI.
Anthropic, which is a private company, announced a cloud deal with Google last week worth tens of billions of dollars.
Mr Powell said the Fed is also closely monitoring how AI could affect the jobs market.
Amazon recently announced that it is laying off 14,000 workers after cuts among other Big Tech companies. Microsoft has made more than 15,000 cuts this year, while Meta and Google have also made layoffs.
"You see a significant number of companies either announcing that they are not going to be doing much hiring or actually doing layoffs, and much of the time they're talking about AI and what it can do," he said.
"So we're watching that very carefully."
