You can just picture Sam, Elon, Satya, and Jensen in a Silicon Valley karaoke joint somewhere belting out that ‘80s classic: We are the world. 

While governments try to wrap their heads around how to legislate for the Brave New World the US tech industry has thrust upon them, they’re also jostling to grow domestic AI industries. As the AI market matures, there is a stark realization in public sectors elsewhere that this is America’s AI world — the rest of us just live here.

If You Can’t Beat ‘Em, Incentivize ‘Em

Reining in Big Tech means different things in different countries, of course. In China, the Great Firewall is being maintained, more or less. Starting July 9, developer access to ChatGPT will be cut off in China, and domestic rivals are flocking to fill the Sam Altman vacuum. Slightly further down the sliding scale of governmental control is the European Union, which passed the AI Act in March and recently told Meta to stop scraping people’s Facebook data (oh, Meta!) to train its large language models. But EU member states are keen to set themselves up as an AI hub — especially France, which CNBC reports is vying with ex-EU member the UK to attract AI investment.

Keegan McBride, an adjunct senior fellow at the Center for a New American Security and a lecturer at the Oxford Internet Institute, told The Daily Upside that as states figure out what kind of leash they want to put on AI software, they’re also frantically competing for the industry’s favor:

• McBride said as states’ public sectors become increasingly digitized — and thereby more dependent on private American companies — the handiest part-way solution is to build data centers on their own turf, where they can exercise a degree of control. “You’re going to see states competing to have data centers within their territories, competing for investments, you’re going to see them engaged in regulatory innovation,” he said.
• Ultimately, McBride thinks the math doesn’t really really add up. “France has tried to build a sovereign cloud in the past that didn’t work. The economies of scale just don’t match up,” he said.

Crucially, the US is home to the world’s “hyperscalers” — i.e., companies that can build out cloud infrastructure — a market that more or less shakes out as just Amazon, Microsoft, and Google.

Taking Sides: In a December 2023 report, Goldman Sachs identified the “geopolitical swing states” for AI development as the UK, the UAE, Israel, Japan, the Netherlands, South Korea, Taiwan, and India. Goldman theorized these states may make alliances with “more powerful states” (read: the US and China) to further their own AI advancement. Right now the US has a head start, with Chinese tech giants like Huawei hampered by US trade restrictions on semiconductors, per The Information.

The Department of Health announced this week that Medicare is cutting prices for dozens of prescription drugs that have outpaced inflation. To which we say, what about the rest of us? Federal health insurance for seniors covers only about 20% of the country. 

In Treatment

Americans are constantly fretting over the increasing cost of healthcare, and it’s not psychosomatic. Between 2022 and 2023, prices for nearly 2,000 drugs increased faster than the rate of general inflation, with an average price hike of 15.2%, according to the Office of the Assistant Secretary for Planning and Evaluation. The office also says for every dollar paid in other high-income countries for drugs in 2022, consumers in the US paid $2.78. Read that again. 

President Joe Biden’s signature Inflation Reduction Act partly intends to reduce prescription medication costs by finally allowing Medicare to negotiate prices — Big Pharma isn’t too happy with that one — and requiring drug companies to pay rebates to Medicare when prices increase faster than the rate of inflation for certain drugs. These latest reductions fall in the latter camp:

• The price cuts will apply to 64 treatments for cancer, osteoporosis, infections, and other ailments given to patients between the start of July and the end of September. The drugs are used by more than 750,000 Medicare enrollees annually. In a nation of 333 million, that’s not a whole lot of people, but it could be the start of something.
• “As Medicare is a huge buyer, it has considerable leverage to reduce costs if it has the political will to do that,” Georgetown Law Professor Lawrence Gostin told The Daily Upside. “Private insurers will negotiate with drug companies based on the cost of drugs sold to Medicare. They will not want to pay a premium over and above the price Medicare pays.”

However, industrywide price cuts could bite investors in the backside. Big Pharma stocks including Pfizer, Johnson & Johnson, and Bristol Myers Squibb have already been underperforming the S&P 500 over the past two decades, Barron’s reported.

The R&D Claim: Drug companies often argue price hikes help fund research and development of better meds. Gostin said that’s true to an extent, but often exaggerated. “The pharmaceutical industry is not transparent about the amount of money it devotes to innovation as opposed to drug advertising,” he said. “The industry also often prefers so-called me-too drugs that don’t truly advance benefits for patients but do feed the companies’ bottom line.” Wait, so does that mean there’s really no difference between Wegovy and Zepbound?

To divine the future of the US oil and gas industry, energy geeks eagerly await the quarterly survey by the Federal Reserve Bank of Dallas, which polls around 140 energy firm executives in Texas, northern Louisiana, and southern New Mexico.

It’s mostly read for its inclusion of anonymous comments; CEOs can speak candidly about issues impacting their business. So what’s on their minds? 

Crude Consolidation

Over half of US oil executives surveyed say the ongoing wave of mergers and acquisitions could squeeze US oil production if deals keep flowing.

The first quarter of 2024 saw more than $50 billion in US oil and gas industry mergers and acquisitions announced, continuing a trend from last year’s $192 billion in deals, which included ExxonMobil’s now-FTC-approved $60 billion takeover of Pioneer. Almost two-thirds of the deals in Q1 involved assets in the Permian Basin, the highest-producing oil field in the country. It stretches across western Texas and southeastern New Mexico.

A question in the Dallas Fed’s survey about how oil production would be impacted if “there were continuing industry consolidation” over the next five years led to some venting: 

• 48% said they believe US oil output will be “slightly lower,” while 6% foresee “significantly lower” production. 
• “The last few years of mergers and acquisitions have decreased activity in the oil patch,” said one anonymous executive. “The majors are not going to exhaust reserves to raise domestic production until supply and demand curves meet their goals. They do not have to participate in treadmill drilling to keep incomes at a pace to develop reserves and pay back loans.”

Another executive predicted insolvent oil service companies: “Oil and gas operator consolidation is squeezing an over-supplied vendor market for all services, which will require consolidation or extensive bankruptcy in the vendor pool to rightsize the market.”

Stale Shale: Oil and gas production remained essentially unchanged in the second quarter, according to the survey. The US Energy Information Administration said earlier this month that it expects oil output to grow by around 310,000 barrels per day to 13.2 million this year, considerably less than the 1 million per day increase last year.