Chapter 1: What economic trends are driving the rise of AI?
On the program today, macroeconomics in two flavors, gold and AI. From American Public Media, this is Marketplace. In Los Angeles, I'm Kai Rizal. It is Monday today. This one is the 26th of January. Good as it always is to have you along, everybody. We are going to begin today with a story that's not really about the story that you think is going to be the story. I know, but stick with me.
I'll go slow. Gold has been, and there's really no other word for it, simply soaring. Futures topped $5,000 an ounce over the weekend, first time that has ever happened. And $5,000 and change per troy ounce is almost twice what gold was just a year ago. And that's been happening. And here's the twist.
As it's been happening, gold has started to displace dollar-denominated assets in the holdings of central banks around the world. Reuters reports gold now slightly outvalues treasury bonds in those holdings. And data from the IMF shows U.S.
dollar assets now account for less than half of those holdings in absolute terms, even as gold has risen sharply to make up around 28 percent of those holdings. That is exactly what you might expect to see happen if the U.S. dollar were losing its appeal as a safe haven go-to. Marketplace and Mitchell Hartman gets us going.
Gold has been edging ever higher partly because investor stress has, says Samir Samana at the Wells Fargo Investment Institute.
There's just a very high level of angst about all the things that are going on in the world.
tariffs and trade wars, geopolitical tensions in oil-producing regions, rising government debt across everywhere.
I think a lot of investors are looking for a port in the storm, an investment that's outside financial assets, right, which tend to be things like stocks and bonds. Gold is one of the things they see as being money good.
Foreign central banks have been buying up gold, too. That's partly a defensive move. A hostile government can slap on sanctions, but it can't seize gold out of another country's vaults. The trend took off after Russia invaded Ukraine in 2022. This rise of gold in central bank holdings doesn't necessarily imply they're selling off U.S. dollars and treasuries, says Jennifer Lee at Bank of Montreal.
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Chapter 2: Why are Americans concerned about the proliferation of AI?
I'm Nancy Marshall-Genzer for Marketplace.
Here's a not-so-random fact about artificial intelligence in the U.S. economy. It comes to us from the Federal Reserve Bank of St. Louis. AI in all its components, software, equipment, R&D, and last but not least, all those data centers that are being built, added just shy of one percentage point to gross domestic product in the first three quarters of last year.
Now, one percent does not sound like a whole lot, I know, but in a $31 trillion economy... That is real money. So, of course, Americans are thrilled with this new technology that is upon us, right? Well, not exactly. Generative AI has, yes, been adopted at a dizzying pace. But plenty of people are still uneasy about it, whether it's boosting the economy or not.
We asked Marketplace's Megan McCarty Carina to do a vibe check.
It's hard to keep a classroom full of college students engaged these days. So Professor Enid Baxter-Rice takes hers outside. We had class in that tree down there in November. For 20 years, she's taught cinema and technology at California State University Monterey Bay.
And for a while now, she's noticed some troubling changes in her students as smartphones, social media, and short-form video have become ubiquitous. I saw a Huge amount of distraction. I saw that they weren't socializing as much, and I saw that they had more anxiety. Now, she's contending with a new disruption.
One day, I turned on my computer, and there was ChatGPT available on the dashboard for free. Last year, the Cal State system made a $17 million deal with OpenAI to provide ChatGPT to half a million students and faculty, whether they want it or not. We're being told if you don't teach these kids this technology, it's just going to be another way that everything's working against them succeeding.
But Baxter-Rice is already noticing unsettling effects. Students cheating on papers, of course, but also a sense that people on campus are struggling psychologically with the new technology. I'm concerned. I'm really scared. What's happened to young people over the past 15 years is... is scary enough, and then adding this technology to the conversation is really frightening.
The tech industry is racing toward a future that doesn't sound great to a lot of people. Recent data from the Pew Research Center show Americans are much more concerned than excited about AI. And in communities across the country, data centers have become a lightning rod. Local opposition has already shut down dozens of projects.
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Chapter 3: How is gold impacting the economy amid rising AI concerns?
Just to show how much you're in this for. She's vested in California's public employee pension, which is heavily exposed to AI, from index funds to individual stocks to infrastructure funds and real estate trusts tied to data centers. Does it concern you that your personal future is invested in the success of this whole thing? I mean, it's just really distressing.
Now I'm part of another system that I haven't had any input into. And it's going to possibly drastically affect people's lives. Whether the AI industry keeps booming or not. I'm Megan McCarty Carino for Marketplace. Coming up... The evolution of data transfer is pretty remarkable.
Also gets pretty loud and pretty hot. But first, let's do the numbers. Dow Industrials up 313 today, two-thirds of 1%, 49,412. The NASDAQ added 100 points, about four-tenths percent, 23,601. The S&P 500 gained 34 points, about a half percent, 69,050. Some of the big AI players out there. NVIDIA dropped six-tenths percent.
Broadcom, supplier of semiconductors and software, increased one and a half percent. Micron Technology dropped about two and six-tenths percent. Bonds up yield on the 10-year T-note down 4.21%. You're listening to Marketplace. This Marketplace podcast is supported by Intuit QuickBooks. In a new year, momentum matters.
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Money Movement Services are provided by Intuit Payments, Inc., licensed as a money transmitter by the New York State Department of Financial Services. This is Marketplace. I'm Kai Risdahl. We're going to continue with the thread of Megan's piece now, artificial intelligence. And to do it, do me a favor and picture for me, if you would, a data center. What does it look like?
We are sitting in actually what they used to call the terminal annex for the U.S. Post Office.
Well, whatever you imagine, it's probably not an historic building smack in the middle of downtown Los Angeles, right?
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Chapter 4: What do durable goods orders reveal about business investment?
This data center is not that. The infrastructure of the AI economy is being built by a lot of different companies. CoreSight is what's called a co-location provider. All kinds of businesses, banks and social media platforms and hospitals. It's kind of like an apartment building for computing power. You do not have here in Los Angeles, certainly a low cost of real estate.
You do not have a low cost of power. So what's the benefit to being here?
Because we have one of the largest user populations that sit here in Los Angeles that need access to all of it. When you're using your phone and you have access to all the different applications on your phone, from whether you're depositing a check on your Wells Fargo application or you're ordering Uber or whatever it might be, that is all being accessed from a data center like CoreSight.
It's easy to forget in this hyper-connected economy of ours that the Internet is basically, and not oversimplifying too terribly much, a series of tubes, a network of cables and wires going all over the planet, under oceans as well, plugging into data centers like this one. Let's get inside and see these cabinets. I hear a vague hum, right? Is it going to be loud in there? All right.
Okay, well, that's where we have crack audio engineers on the staff here at Marketplace. So down a windowless hallway and through a locked door, we walked into a sterile-looking room with rows and rows and then more rows of metal cages. Oh, and it's hot, too. It's really hot. This is an operational computer room.
The amount of energy coming into this building is enough to power a small town, thousands of homes. Best guesses are that about a third of the energy that data centers use goes to keeping all these computers cool. We're in the hot area of the room. There's a hot aisle and cold aisle configuration, which is done for efficiency purposes. If we put you in the cold aisle, it'll be below 80 degrees.
We keep the cold aisle around 75 degrees. This is insanely loud. Yeah. And it's just computers. These are just all computers running right now. That's insane.
So this room is going to have a lot of infrastructure that CoreSight provides to support powering and cooling the servers that you see racked and stacked across all of the rows that sit inside this room.
So fundamentally, you're the landlord, right? Correct. I mean, is that the analogy?
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Chapter 5: How are data centers related to the growth of AI technology?
So while the data centers do take up a lot of power, that supply is going for them and for residents, and it will bring the cost of power down when we have more supply.
Let's walk down this aisle. I just want to see what else there is around here. We saw more cages with computers in them, plus the power room with rows upon rows of battery packs and a whole lot of fluorescent lit hallways. How do you guys not get lost? Literally every little hallway, every enter room, every corridor is exactly the same.
Lots of signs.
Lots of signs. There's one sign in here. Corridor number one. Corridor number two. My takeaway from this is that... Cloud is very ephemeral. Wi-Fi is very ephemeral. But fundamentally, it's all a bunch of computers hardwired together.
Yes.
Right? That's basically how all this works.
That's exactly correct.
Which sounds idiotically simple, but you never really think about it that way.
Which makes these kinds of data center campuses very critical. I won't say like a hospital, because that's life or death, but this is basically where the digital economy resides.
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