Generative artificial intelligence was not part of the lexicon for most of us during President-elect Donald Trump’s first four years in the White House. That all changed in late 2022, when the launch of ChatGPT kicked off an AI investment boom that continues to this day. Now, after Trump this week beat out Vice President Kamala Harris to return to the Oval Office, one of the main questions facing investors is how the businessman-turned-politician will handle rapid innovation in AI, a key driver of two-year-old bull. the market. Since Trump did not focus on AI policy during his 2024 campaign, one place to look for answers is in his first term in office. Trump signed an executive order in early 2019 that established the “American AI Initiative” and asked government agencies to place a greater focus on AI research, among other things. The impact of that directive, which critics at the time said lacked specifics, is still unclear nearly six years later. What is clear now, however, is that AI isn’t going anywhere, and the people currently in Trump’s orbit have connections to the field. Billionaire entrepreneur Elon Musk, who spent millions to help elect Trump and campaigned alongside him, was an early supporter of OpenAI-creator ChatGPT. More recently, he founded a startup called xAI and has championed the technology’s promise and potential pitfalls. Vice President-elect JD Vance spent several years working in venture capital and, as a Republican senator from Ohio, has been critical of Big Tech. During a Senate hearing in July, Vance criticized what he called “preemptive efforts to over-regulate” AI that could stifle innovation and favor industry incumbents. For starters, Trump looks set to take an ax to one set of regulations: President Joe Biden’s own executive order on AI. Signed in October 2023, it created new safety and security standards, while also requiring research into the impact of AI on the labor market. It also included guidelines on equality and civil rights. The official Republican Party platform, released ahead of its nominating convention, includes a pledge to repeal Biden’s order. “In its place, Republicans support AI Development rooted in Free Speech and Human Flourishing,” the GOP platform stated. At a high level, generative AI is a cutting-edge form of technology that will shape the next decade and beyond. While the field of AI has been around for decades, generative AI applications can create new content, including computer code, human text, and images, in response to user requests. Those who lead in generative artificial intelligence will most likely shape the world as we know it. At the same time, any technology that has consequences must be considered a matter of national security. Building 5G infrastructure during Trump’s first term checks many of the same boxes. With 5G, Trump wasn’t just hoping the US could get in on the fun faster than everyone else. He also looked for ways to contain our enemies and “enemies”. “Secure 5G networks will be absolutely vital to America’s prosperity and national security in the 21st century,” Trump said in April 2019 at a White House event during which his administration announced several initiatives around growth of the 5G network. “We cannot allow any other country to outcompete the United States in this powerful industry of the future. … The race for 5G is a race that America must win, and it’s a race, frankly, that our companies big ones are involved now. We’ve given them the boost they need. It’s a race we’re going to win.” The same line of thinking applies today – just replace “5G” with “AI”. And, as with 5G, China remains a major threat and competitor to US ambitions. The first Trump administration helped the US private sector in its efforts to build 5G infrastructure, taking steps that included spectrum deals and support for the merger of T-Mobile and Sprint on the grounds that the connection would accelerate 5G deployment. We’ll bet the same approach applies to AI, except that Verizon, AT&T and their suppliers aren’t the major players. Instead, support could go to US companies like Nvidia, Amazon, Meta Platforms, Microsoft, Alphabet and a host of others that drive innovation. A number of prominent tech leaders, including OpenAI’s Sam Altman and Alphabet’s Sundar Pichai, took to social media to congratulate Trump this week. At the same time, Trump may try to limit Chinese companies’ AI capabilities. In the 5G race, that meant putting restrictions on telecom equipment manufacturers like ZTE and Huawei. In the AI race, it may not be so much about the physical infrastructure coming into the U.S., but about maintaining or modifying the Biden administration’s restrictions on U.S. semiconductor companies exporting chips and chip-making equipment to China, analysts at Deutsche Bank in a note to customers on Thursday. . The firm suggested that Trump might even tighten those chip export rules, “burdened by blanket tariffs.” We may also see more pressure on companies to further develop a US-based semiconductor supply chain. The playbook would be to support US innovation in generative AI, while at the same time doing what it can to deter those who seek to take the country’s AI lead – without risking too harsh a response , just as it did with 5G. Trump has argued that his tough stance on China is less about stifling competition than about ensuring a level playing field. Of course, the people Trump has around him this time around are different, as is the technology in question. The stakes are also much higher. So it won’t be exactly the same, but his approach to 5G gives us a frame of reference. Tensions over Taiwan At the center of all the discussion about US competition in the AI race and geopolitics is Taiwan, the democratically governed island in the South China Sea that Beijing claims as its own. Taiwan plays a critical role in the global electronics supply chain, with the vast majority of the world’s most advanced semiconductors manufactured on the island. Taiwan Semiconductor Manufacturing Company – the $1 trillion maker of chips for Nvidia, Apple and many other firms – figures prominently in this photo. Washington has maintained a position of “strategic ambiguity” toward Taiwan for decades. Despite the lack of formal diplomatic ties, the US has long been a major arms supplier to Taiwan, although in recent years the government has gone further and made military aid packages available to the island. This comes as China has been more aggressive in its stance towards Taiwan, conducting military exercises in nearby waters on numerous occasions. Trump has spoken harshly about Taiwan in the past, saying in an interview this summer that “Taiwan should pay for our defense.” He also said, “You know, we’re no different than an insurance company. Taiwan doesn’t give us anything.” If we’ve learned anything about Trump, it’s that he likes to go out on a limb, but ultimately sees himself as a businessman and a marketer who can drive a hard bargain. We are likely to see this dynamic in play with his tariff proposal of at least 60% on Chinese imports. “President-elect Trump is not blind to what could hurt us,” Jim Cramer said Friday. “I know there’s a sense that what this president-elect wants is hardline and ideological. I say it’s a deal that has to be made. That’s his position: 60%, and then you throw it away . It’s ‘The Art of the Deal,'” Jim said, referring to Trump’s 1987 book of the same name. It’s not in Trump’s, or America’s, best interest hand over control of Taiwan to China, especially not now because the US lacks its own AI manufacturing infrastructure. Like it or not, the US may have the best semiconductor design companies on the planet, but these companies need factories in Taiwan to make actual chips The Biden administration’s CHIPS Act is providing billions to companies, including TSMC and Intel, to build advanced chip manufacturing plants in the U.S., reducing reliance on Taiwan, but they’re not yet ready for prime time.After all, Trump’s approach to AI carries significant implications for investors with heavy exposure to the topic, which includes us at the Club. In addition to the big tech giants mentioned above, we own companies such as electrical appliance supplier Eaton in large part because of their AI beneficiary status. Hopefully Trump will, for the most part, be pragmatic in his approach to AI. We also understand that he can take a hard line at times, as he did with 5G. Generative artificial intelligence, including the advanced chips that provide the processing power to enable it, is more than just the most important technological advance of our time. It also poses massive security risks if it falls into the wrong hands or undermines the US’s position as the world’s largest economy and leading global superpower. We fully expect AI innovation to advance under the second Trump administration, perhaps at an even faster pace. However, it probably won’t always be smooth sailing as Trump seeks not only to boost American innovation, but also looks for ways to slow down our competitors on the global stage without triggering a response from China that sparks something much more serious than some “friendly” , but stiff competition. (See here for a complete list of stocks in Jim Cramer’s trust portfolio.) 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Republican presidential candidate and former U.S. President Donald Trump walks on stage after early results from the 2024 U.S. presidential election at the Palm Beach County Convention Center, in West Palm Beach, Florida, U.S., November 6, 2024.
Callaghan O’hare | Reuters
Generative artificial intelligence was not part of the lexicon for most of us during President-elect Donald Trump’s first four years in the White House. That all changed in late 2022, when the launch of ChatGPT kicked off an AI investment boom that continues to this day.
Now, after Trump this week beat out Vice President Kamala Harris to return to the Oval Office, one of the main questions facing investors is how the businessman-turned-politician will handle rapid innovation in AI, a key driver of two-year-old bull. the market. Since Trump did not focus on AI policy during his 2024 campaign, one place to look for answers is in his first term in office.