The AI Arms Race Has Begun
Posted July 9, 2026
Artificial intelligence is rapidly becoming the most important military technology of our age.
The country that masters AI first will dominate the rest of this century economically, militarily, and strategically.
But this isn’t simply a software race.
It’s an industrial race.
In this new Macro Watch video, I argue that winning the AI arms race will require far more than better algorithms. It will require unprecedented investment in semiconductors, data centers, electricity generation, transmission infrastructure, advanced manufacturing, critical minerals, and skilled industrial labor.
The central question is therefore not whether the United States can develop world-leading AI models.
The real question is whether the United States can mobilize quickly enough to build the industrial base required to support them.
The video examines China’s extraordinary industrial advantages—including manufacturing output, steel production, electricity generation, shipbuilding, batteries, industrial robots, and critical mineral processing—and explains why these strengths matter far more than many investors currently appreciate.
It then turns to the United States, examining both its strengths and its vulnerabilities.
Among the topics discussed are:
- China’s manufacturing dominance
- Why compute has become a strategic resource
- NVIDIA and the explosion in AI infrastructure spending
- Why hyperscaler capital expenditures are surging toward unprecedented levels
- America’s dependence on Taiwan for advanced semiconductors
- The massive buildout now underway in US semiconductor manufacturing
- Why electricity and transmission have become critical bottlenecks
- The industrial constraints that could ultimately determine who wins the AI arms race
The implications extend far beyond national security.
The investment required to compete with China is likely to reshape the American economy for years to come, driving enormous spending on factories, power generation, transmission infrastructure, semiconductors, and defense-related industries.
This investment boom will create significant opportunities for investors.
But it will also create significant risks.
Many companies associated with AI are already trading at extremely demanding valuations, making careful stock selection more important than ever.
I believe the AI arms race will become one of the defining economic and investment themes of the coming decade.
This video explains why. It is the fourth video in the Macro Watch series The New Defense Spending Boom.
Subscribers to Macro Watch can click here to watch it now.
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