Citadel Securities says AI is the latest reason not to bet on the US.
In a memo commemorating the Fourth of July holiday, the company examined the impact of the AI boom on American business and productivity. The report said new technologies are providing the United States with significant economic advantages by lowering barriers for small businesses across a variety of sectors and fostering a new wave of entrepreneurship.
“In effect, AI allows companies to take advantage of economies of scale before fully scaling up, pooling capacity across functions and lowering the production threshold at which it becomes economical to scale,” said macro strategist Frank Fleit. “Never be hostile to America.”
Economists like Mohamed El-Erian say U.S. exceptionalism faces serious challenges as market headwinds shift, while others suggest the U.S. is already starting to lose its advantage over other major economies.
But Citadel Securities argues that on the contrary, AI is already helping the United States maintain its status as a global economic superpower by creating a burgeoning entrepreneurial economy characterized by a culture of hustle and innovation. As Fleit pointed out, the U.S. small business sector generates nearly 40 percent of economic output.
“AI could have the greatest benefit by complicating America’s hustle culture: lowering the cost of starting a business, increasing the influence of founders, and turning this country’s instinct for innovation into new economic activity,” Fleit added.
Much of the recent discussion about AI has centered on the incredible construction of infrastructure such as stock markets and data centers. But Fleit added that it may be time for a new dialogue.
“So far, the AI theme has been framed around frontier labs, hyperscalers, and compute bottlenecks,” he said. “We think an equally strong focus will be on what AI will do for builders, founders, and small businesses that drive a large share of the economy.”
Small businesses have traditionally struggled with limited staff and resources, especially outside metropolitan areas. As Flight points out, AI now allows business owners to enjoy economies of scale and scale their operations in ways that allow them to compete with larger peers.
He acknowledged that this could mean certain tasks being automated by AI. But while that may lead to job losses, it is also likely to create new business opportunities that will ultimately create more jobs as companies grow and explore new areas, Fleit added.
To illustrate this, he gave the example of Jevons’ paradox. This is the economic principle that innovative new technologies create more efficiency and ultimately lead to the creation of more jobs. Torsten Slok, chief economist at Apollo, recently made a similar argument, predicting that AI will lead to a boom in the labor market rather than the destruction of jobs that many feared.