Always a great moment to speak to Jamie Dimon, of course, the chairman and CEO of JPMorgan. This is the fourteenth year of the JPMorgan Tech Summit here in London, bringing together PE, VC, and of course your tech investment team. Jamie, thank you for your time. This is an environment, as Dani and the team were saying in New York, where we're seeing the Nasdaq potentially notching a third straight record. Tech stocks are powering ahead. We've got the fundraising news coming through from OpenAI. Investors still willing to put money to work, and yet we've seen the cost of capital increase. We've seen in some AI names, CDS spreads starting to rise. How much latitude do you see, Jamie, for further funding for this AI?
Thanks for the time. Thanks for having me here, everyone. Let's start with the good news. This conference used to be 20 people, now it's 2,000 investors and hundreds of companies around the world, and it is a very positive sign of tech's ability to expand its diaspora. It's not just Silicon Valley anymore. It's everywhere. So that is a very good sign. And a lot of these companies, they're real. They're going to invent things that help mankind for hundreds of years. You know, debt financing is a short-term kind of issue. But look, rates are going up. A lot of demand for capital, a lot of government financing. You know, in my view, a little bit expected. You know, if it goes up higher than yours, does it create risk? The credit spreads gap? Yeah, it creates risk for all companies. You know, it changes valuations. And then your market's open and closed, you know. So there's not... there's no permanent state of affairs when it comes to markets.
We are seeing that increased competition for capital. So in layering that on top of the forecast around the CapEx spend for AI — 700 billion this year, potentially 1 trillion next year — is the view from your team. What is the potential biggest risk to that forecast? Is it a physical build-out? Is it the monetization? Is it the cost of capital? Is it something else?
Well, I think you mentioned it's all of those things. You know, and when we went through this internet, in total it pays off, but there'll be better models, better semiconductors. There'll be changing schedules. There'll be lawsuits about building these data centers. Look, most of them get built. They'll probably be built where people want them as opposed to where people don't want them. They'll be used. You know, AI itself, I think, creates a lot of value. And so I'm not really worried about it, but you do point out it is a lot of additional borrowing. So there's normal CapEx borrowing. There's a... I don't know if the borrowing's a trillion because it's more like the commitments, but there's a lot of borrowing. And then the government's borrowing 2 trillion again. And this is a global phenomenon. It's not just the United States. And yeah, there's a supply and demand of capital. If you thought there was a savings years ago, now there's not. And you know, but it could be a good thing if rates are going up because of demand for capital and the capital is viewed productively. The problem apart is the government, its consumption. That's a whole different thing. So, and then of course, government spending can drive inflation, so there could be a flip side of how this plays out.
I want to get on to that, but you mentioned the politics of AI. What would your advice be to the frontier lab founders and to governments in terms of how to resolve the politics of AI and address those tail risks?
Well, okay, these are different issues. Okay, data centers, you build them where they're wanted. You know, and half of them... half the new ones in America, Texas and Virginia. And you know, people don't want them there. You're not going to win. You get lawsuits, but there are a lot of states who would take it that have access to power. And of course, you know, any big company has to be a good community citizen. So I think a lot of these people are doing it. They're going to town. You know, they're being part of the community. They're helping the community to get the rights. They, you know, make commitments that won't raise consumer electricity costs. It's just things like that, and that'll be worked through. And AI has these huge positive effects. I mean, I do think it'll cure a lot of diseases, and it'll save accidents on the roads and the composite materials. It'll make life unbelievable for people. The downside is obviously what you read about with, you know, the agents and mythos and all these things that can cause trouble. And that's a legitimate concern. It's a real thing. I'm not going to get hysterical over is it existential or not. What we're doing is raising our... you know, rolling up our sleeves and going to work to fix it. So the banks have always had a system in place. We help each other. We also started this thing called the Alliance for Critical Infrastructure. It's starting with 50 companies. It's starting in the US. It's across six industries, you know, tech, financial services, water, transport. These industries that the government pointed out as lifeline, but eventually it should probably expand to healthcare, pharma, agriculture. I mean, every industry is kind of critical, and it should also... we need to help the smaller companies too because they have different vendors and different needs. And so it's a lot of work. We simply have to do it. AI created vulnerabilities that we didn't know about, and we're always worried about cyber.
Yeah. Before these things. And you've thought about cyber risks for a long time. Yeah, I know that. It's our biggest risk. Yeah, it's your biggest risk. Does AI make cyber systemic risks more likely?
Oh, yeah. So that's what I'm saying. That mythos, whatever you thought it was before... And when I published my chairman's letter, I said cyber is our biggest risk, and they didn't publish mythos yet. And I would say that went up tenfold after mythos.
I want to switch focus. Look across the pond to France. What do you make of the bond sell-off? There's been a bit of pullback today. Yields down a little bit across French debt. What do you make of what you've seen, though, in the last few weeks out of France, and whether or not you're... are you worried about contagion risk to other Eurozone countries?
You know, look, maybe a little bit. I'm not going to talk about France in particular. It's a warning to governments. Okay? We can't borrow endlessly and spend endlessly, and it's been going on for a long time. If you look at the buildup of debt around the world... actually, Europe's been less. I mean, you kind of tapped out at one point, but America's gone from, you know, 50% of GDP to 100%. You know, countries around the world are borrowing money. And I think we can't be complacent. And the lesson is there will be a point where the market will ask for more and more and more. And yeah, at one point, they'll feed into corporate debt, corporate credit spreads, and things like that, which is how it normally happens. So I'm on the... I've always said the best thing to do with any of these things is deal with it before it becomes a crisis. If it becomes a crisis, we will deal with it. It just will be in a much less pleasant way.
Okay. I mean, there's... some would argue that we're a long way from that in France in terms of avoiding a crisis given where the politics stands, although she has given her budget details today. Do you watch for contagion into the credit markets? Is that the transmission mechanism that we should be monitoring?
Well, I think yes. I think what you have is, you know, all businesses should prepare for different outcomes. I guess a mistake to say, here's my forecast, I'm going to run my business according to that, because you should be prepared for a wider range of outcomes. Intellectually, it's very good to think about it. You may think the odds of somebody that are less than me or more than me, but I think there's a risk that inflation is sticky, that rates continue to go up. And so for corporations, whether you leverage or not, is when you have to refi or borrow money, are you prepared for higher, you know, credit spreads and stuff? So JPMorgan, we have to be prepared for it. So if, you know, credit spreads gap out and rates go up, we're completely fine. But we... the reason we run it that way is so we can continue to service our clients. You know, we're not making bets on those kind of things. We're serving clients through thick or thin.
On the US, essentially full employment, growth north of 2%, fiscal expansion, a deficit of 6%, your record borrowing. How is that... is that dealt with ultimately through financial... is that ultimately what it has to come down to, or inflation?
Yeah. We don't know yet. I mean, I think we said... half what you said is good news. You know? And those are... here's some other good news. Corporate debt is not too much. Consumer debt is not too much. It's government debt. That government debt does fuel a little bit of inflation. It also fuels corporate profits, and so I don't know how it's going to sort out. It doesn't have to be financial oppression. I just think rational things make it better. And I should point this out because this may be my next op-ed. Good policy is free. I believe that good policy in the United States and in Europe can drive growth 1% higher and does not cost money. That is permitting, school education, deregulation without creating any additional risk. Rational climate policy, you know, different immigration policies can drive growth. Done properly, it's deflationary, and you grow more. And in almost every country, that 1% growth will start to drive debt to GDP down.
Yeah. I want to ask you about the treasury markets. Ray Dalio says the Chinese, the Japanese, they're getting more cautious. They want to unwind more of their holdings in treasuries. That pushes up essentially the long end. It yields up further. Is that underestimated by the markets? The role of Japan, the role of China in the treasury markets?
