As we have discussed in the past, a common narrative surrounding Artificial Intelligence (AI) is that the technology will impact and potentially eliminate jobs. As we have also discussed in the past, though it is inevitable that AI will disrupt the job market, we believe the data supports the idea there will be a net benefit as it relates to the labor market.
So today’s weekly market commentary looks at the impact AI is having on jobs, but through a different lens. The enclosed piece examines how AI is doing more than transforming established businesses – it is also making it easier to start new ones. With U.S. business applications reaching record levels, AI may be helping fuel a new era of entrepreneurship and creating a fresh set of opportunities and risks for investors.
The enclosed chart plots new business formation in the United States, measured in a rolling 12-month sum. The chart goes back to 2022 and continues on through to present day. As the chart shows, through June 30 of this year, more than six million new business applications have been filed over the previous 12 months, which is a 15% increase. In terms of this activity, the author explains, “while entrepreneurial activity has increased across many industries, the strongest growth has occurred within the information sector, where new business applications are up 25% over the last 12 months as Americans increasingly launch websites, software products, and media services.” – AOM 488
The author continues on to make the case that not just AI, but the rapid adoption of AI, is one of the main factors U.S. business formation is hitting record highs. The piece explains, “recent releases of AI coding assistants, along with design tools, content generation platforms, and workflow automation solutions, are enabling individuals and small teams to develop, test, market, and scale business concepts more efficiently than ever before.” – AOM 488
AI and AI tools are lowering the barrier of entry as it relates to business creation. This in turn is allowing more of the U.S. population to participate in entrepreneurship which has the potential to lead to more innovation. In terms of what this means for investors, the piece explains in the close, “the long-term implications could extend well beyond startups. AI-enabled entrepreneurs may challenge incumbent providers across industries, including enterprise software, professional services, and other knowledge-based sectors. At the same time, supporting this wave of business creation may require substantial investment in the infrastructure that powers AI, potentially benefiting companies that provide data center equipment, electrical infrastructure, power generation, networking technology, and other critical AI-enabling assets.” – AOM 488
AI’s economic impact may extend well beyond today’s leading technology companies. Investors will need to identify both the established businesses vulnerable to AI-driven disruption and the companies positioned to support or benefit from the emerging entrepreneurial boom.
We would ask that you review the attached piece at your convenience and please let us know if you have any questions or if you would like to discuss it further. And as we always end this correspondence, please remember that regardless of current momentum and regardless of the key takeaways in this weekly perspective, we will continue to monitor and manage with a thoughtful approach based on your specific long-term objectives.
