1Q26_ Quarterly Outlook Report_Final_EN - Flipbook - Page 28
T H E P LUMB LI N E | A RETU RN TO F I RS T PRI N CI PL ES
SPOTLIGHT | ARTIFICIAL INTELLIGENCE
Walid Khalid
Director, Investment
Strategy
Juan Manuel Herrera
Betancourt
Senior Economist,
Investment Strategy
Key conclusions
•
AI shifts linear progress into a self-reinforcing productivity loop, where each generation
of models accelerates the next, transforming linear advancement towards exponential
compounding.
•
Recursive productivity gains could prove deflationary by reducing unit labour costs over
the long haul, while also improving output, providing a substantial and sustainable
tailwind to corporate profit margins and earnings.
•
In the early phases, capital owners will likely capture the bulk of AI-driven gains, widening
inequality as median incomes lag, while policy responses emerge only once these
imbalances become politically unavoidable.
•
Broad-based economic diffusion may ultimately occur, but only after a prolonged period
in which returns remain heavily concentrated among early infrastructure owners (i.e., chip
manufacturers, cloud computing providers, etc.).
•
Physical limits on power, cooling, and materials slow AI scaling, amplifying early-phase
dominance and extending the overall cycle for longer.
•
Structural labour market challenges may be offset through technological innovation.
With fewer future workers, sustained growth increasingly depends on productivity gains.
Technological innovation has historically expanded and improved human capability and
efficiency, though it still required some level of human input to function and improve. For
instance, advanced machinery reduced workloads and automated assembly lines to a great
degree but still needed some level of oversight and skilled operation. In a similar vein, better
processing power enabled computers to perform more tasks at a quicker pace, but human
instruction was still required to produce output. In other words, innovation has continually
progressed over time, but learning has remained external to the technology itself.
Technology has also long been a key driver of economic growth with successive waves of
innovation expanding the economy’s productive capacity by allowing more output to be
generated with fewer inputs. Since World War II in particular, the mass-production era following
the second Industrial Revolution, and later the Information Age, helped sustain productivity
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