Artificial intelligence

Artificial intelligence could deliver the productivity surge policymakers have been hoping for since the global financial crisis. But even if it does, economists caution that faster growth will not be enough to solve the mounting debt burdens weighing on advanced economies.

Public debt already exceeds 100% of GDP across most rich nations and is projected to rise further as ageing populations strain pension and healthcare systems, interest bills climb and governments ramp up defence and climate spending. Against that backdrop, AI is increasingly being framed as a potential fiscal lifeline.

The reality is more complicated.

Productivity: The “Magic” Ingredient-With Limits

Economists broadly agree that sustained productivity growth can dramatically improve fiscal dynamics. Higher output boosts tax revenues without raising tax rates, makes existing debt easier to service and reassures bond investors worried about long-term solvency.

At the Organisation for Economic Co-operation and Development (OECD), modelling suggests that if AI meaningfully raises labour productivity and if employment also expands public debt across member countries could be about 10 percentage points lower by the mid-2030s than otherwise projected. Even then, debt would still climb to roughly 150% of GDP on current trajectories, up from around 110% today.

In the United States, best-case projections from several economists suggest debt could rise more gradually, to roughly 120% of GDP over the next decade rather than accelerating more sharply. But that still represents historically elevated levels.

As one economist put it, productivity is “like magic” for fiscal sustainability yet today’s debt challenges are too large for productivity gains alone to offset.

Demographics: The Structural Headwind

The fundamental constraint is demographic.

Ageing populations mean fewer workers supporting more retirees, pushing up pension and healthcare costs. In the United States, Social Security alone accounts for roughly one-fifth of federal spending, and benefits are indexed to wages. If AI lifts wages, it may simultaneously increase future benefit obligations.

Slowing immigration in some countries, particularly the U.S., compounds the issue by limiting labour force growth. If AI boosts output per worker but the total number of workers stagnates or declines, overall fiscal relief may be limited.

In short, AI may buy time but it does not reverse the demographic arithmetic driving long-term deficits.

Growth vs. Interest Rates: A Delicate Balance

For debt sustainability, what matters is not just growth, but the relationship between growth and borrowing costs.

If AI-driven productivity pushes economic growth above interest rates for a sustained period, governments can stabilise or even reduce debt ratios more easily. But if faster growth also lifts real interest rates for example, because higher productivity raises returns on capital then debt servicing costs could rise in parallel.

This debate is already unfolding among policymakers at the Federal Reserve, where officials are assessing whether AI could permanently raise the economy’s potential growth rate.

Bond markets will be decisive. Since the pandemic, investors have shown a willingness to punish governments perceived as fiscally profligate. Higher yields can quickly offset any growth dividend from technological gains.

Employment and Wages: The Distribution Question

Much depends on how AI reshapes labour markets.

If AI complements workers and creates new categories of employment, tax revenues may rise meaningfully. But if automation displaces workers faster than new jobs are created, or if profits accrue disproportionately to capital rather than labour, fiscal gains could disappoint.

Capital income is often taxed more lightly than wages. A productivity boom concentrated in corporate profits rather than payrolls may widen inequality without generating proportionate public revenue.

On the spending side, governments might benefit from efficiency gains in public administration. Yet history suggests higher growth can also lead to higher spending demands from infrastructure upgrades to social transfers.

No Substitute for Fiscal Reform

Even in optimistic scenarios where AI lifts U.S. growth closer to 3% annually for an extended period, debt ratios are projected to stabilise at elevated levels rather than return to pre-crisis norms.

In pessimistic scenarios where AI disappoints or a recession strikes before productivity gains materialise debt trajectories could worsen significantly, potentially reaching levels that trigger market instability.

The consensus among economists is clear: AI can ease fiscal pressure, but it cannot substitute for structural reforms. Addressing entitlement sustainability, improving tax efficiency and managing spending priorities remain central.

A Race Against Time

There is also a sequencing risk. If financial markets grow nervous about fiscal trajectories before AI-driven gains are realised, borrowing costs could spike. In that case, the productivity dividend may arrive too late to calm bond investors.

Technological revolutions historically take time to diffuse across economies. Infrastructure, regulation, workforce training and corporate adoption all shape how quickly productivity benefits materialise.

For debt-laden economies, the gamble is that AI’s boost will be large, broad-based and timely. That is possible but far from guaranteed.

AI may help governments breathe easier. It will not absolve them of the harder political choices required to put public finances on a sustainable path.

With information from Reuters.

Emerging markets are roaring back in 2026, staging a rally that has surprised investors not only for its speed — unmatched in decades — but also for the broader global context in which it is unfolding.

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While US software stocks reel from artificial intelligence disruption fears and the S&P 500 remains broadly flat year-to-date, emerging markets are decoupling.

In a reversal of long-standing market dynamics, the asset class is briefly playing an unexpected role: that of a relative safe haven.

The rally is broad, persistent and increasingly supported by flows, macro conditions and structural shifts in global trade.

Emerging markets dominate global performance rankings

Data from CountryETFTracker show that the five best-performing country-specific exchange traded funds so far this year all belong to emerging markets.

Leading the rally is South Korea’s iShares MSCI South Korea ETF (EWY), up 43.28% year-to-date after a 96% surge in 2025.

The gains reflect the dominance of chipmakers such as Samsung Electronics and SK Hynix, which are benefiting from strong global demand for AI-related memory and advanced semiconductors, lifting exports and corporate earnings.

It is followed by Peru’s iShares MSCI Peru ETF (EPU), which has gained 25.31%, Brazil’s iShares MSCI Brazil ETF (EWZ) at 22.03%, Thailand (THD) at 21.38% and Turkey (TUR) at 21.32%.

The broader MSCI Emerging Markets Index, tracked by the iShares MSCI Emerging Index Fund (EEM), is up nearly 13% year-to-date.

Two elements stand out here: the scale of the relative strength and the remarkable consistency of the rally.

Over the past two months, EEM has achieved the strongest relative surge against the S&P 500 since 2008. Over 12 months, the performance gap has widened to 25 percentage points — the largest divergence since January 2010.

Emerging markets have also recorded 13 positive months out of the last 14 and closed higher for nine consecutive weeks — a streak not seen since 2005.

There is, unmistakably, a structural trend under way.

Record inflows toward geographic capital reallocation

The rally is not only price-driven but also flow-driven.

The iShares MSCI Emerging Markets ETF attracted more than $4bn (€3.7bn) in January 2026, its strongest month for inflows since 2015.

South Korea alone drew $1.6bn (€1.5bn) in January and over $1bn (€0.9bn) in February, while Brazil attracted nearly $1bn (€0.9bn) in January.

The surge in allocations suggests that institutional investors are actively increasing exposure to emerging markets.

Importantly, flows appear broad-based rather than concentrated in a single thematic trade.

While Asia-focused markets have benefited from AI supply-chain positioning, Latin American funds have drawn support from commodities and cyclical exposure.

Why is this happening?

1) Rotation away from crowded US tech

Much of 2026’s market narrative has centred on artificial intelligence disruption, particularly in long-duration US software stocks.

After years of heavy concentration in mega-cap American technology names, investors are reassessing exposure as valuations look stretched and volatility rises.

Emerging markets, by contrast, began the year trading at sizeable discounts to developed peers.

Capital is rotating away from crowded US growth trades into cyclicals, commodities and regions directly exposed to AI hardware demand.

Ed Yardeni of Yardeni Research highlighted that while the US economy still remains exceptional, emerging economies benefit from expanding middle classes, rising industrial output and export growth that increasingly outpaces advanced economies.

2) Dollar weakness supports emerging markets

Currency dynamics are reinforcing the move towards emerging markets.

Jeff Buchbinder, Chief Equity Strategist at LPL Financial, indicates that the US Dollar Index is close to breaking its long-term uptrend, with expectations of further Federal Reserve rate cuts adding pressure.

Central banks’ gradual diversification away from the US dollar towards gold, alongside a persistent US trade deficit that continues to expand the global supply of dollars, is also exerting downward pressure on the greenback.

For emerging markets, a softer dollar eases financing conditions and improves relative returns.

Bank of America strategist David Hauner describes the near-certainty of the next Fed move being a cut as a ‘volatility compressor’ — a backdrop that has historically supported EM assets.

3) AI hardware boom supports Asia

While AI concerns weigh on US software, the hardware backbone of artificial intelligence is largely produced in Asia.

Taiwan dominates advanced semiconductor production, and South Korea’s Samsung Electronics remains a global leader in memory chips.

In Taiwan, technology-related goods now account for roughly 80% of exports and the bulk of recent growth. Revenue at TSMC continues to track the island’s export momentum, with analysts expecting another year of solid expansion in 2026.

4) Commodities and cyclicals add further support

The strength is not confined to technology exporters. Commodity-linked economies such as Brazil and Peru are benefiting from firm metals and agricultural demand, while Thailand and Turkey are gaining from improved financial conditions and cyclical recovery dynamics.

Against a backdrop of stabilising global growth and easing US monetary policy expectations, emerging markets combining export momentum with improving external balances are regaining investor attention.

Why this matters

The resurgence of emerging markets is more than a short-term performance story.

After a decade dominated by US exceptionalism, the current rally points to a potential broadening of global leadership — driven by currency dynamics, shifting capital flows and the geography of AI-driven production.

If sustained, the move could reshape portfolio allocations and challenge the long-standing concentration of global equity returns in a narrow group of US mega-cap stocks.

From what one should eat to what one should say, AI chatbots on your phone have the final say. The choice of bots, though, is totally in your hands, but what choice you will make with it is barely in your hands. Are you by any chance handing your decision-making power to bots, which you assume makes your life easy? If yes, then let’s consider a few things before your next chatbot conversation. First, understand the dual system model by Daniel Kahneman. According to that, there are two types of systems in the human brain. System 1 is associated with fast, intuitive, emotional, and automatic thinking. System 2 is associated with analytical, slow, effortful, and deliberate thinking. The majority of the technology that is available for the general masses urges individuals to use system 1, as it does not require much effort. Decision-making needs system 2 and is complex and requires time and effort, though this is something that people tend to avoid at all costs. Machines were built to reduce human effort, and artificial intelligence is there to reduce the decision-making efforts, something that differentiated the individual from the technology or innovation earlier.

Now at the state level, artificial intelligence is being integrated; take the example of the United States National Defense Strategy of 2022, where the inclusion of artificial intelligence in decision-making processes was of prime importance. At the systematic level, unfortunately, until now, there have not been concrete efforts towards establishing rules regarding artificial intelligence, except for the Bletchley Declaration, which was a landmark international agreement on AI safety. Though at the individual level, rather than being careful, people are playing with and handing over their decision-making power. As was reported by the BBC, in an interview, Megan Garcia, the mother of a 14-year-old, said that an AI chatbot encouraged her son to commit suicide. Another case involving a young Ukrainian woman with poor mental health received suicide advice from an AI chatbot. Another report by Vice of a person who committed suicide after having multiple conversations with a chatbot over environmental issues. AI chatbots that run on algorithms have been taken as emotional support beings, which they are not.

They are given different names to grab the attention of the user, such as “your goth friend,” “your possessive girlfriend,” and several others. They are targeting the emotional side, or System 1, of the user, and they have been quite successful in that. Everyone today almost has an AI chatbot with whom they have a conversation at least once a day. According to Chabot’s 2025 statistics, more than 987 million people use AI chatbots today. ChatGPT dominates the AI chatbot market share with 81.85%, using it globally, followed by OpenAI’s GPT-4, Microsoft Co-Pilot, Google Gemini, Claude, and DeepSeek with 11.05%, 3.07%, 2.97%, 1.05%, and 0.01%, respectively. With that, it is becoming dangerous and needs to be handled with more care and caution. The responsibility lies on individuals as much as it lies on the state and the international organizations.

Technology has been advancing for decades, and it has been creating ease and comfort for its users. Artificial intelligence, being one such technology, is beneficial too, but it should be used to enhance the mental capabilities and not hand over one’s control over things. AI is expanding and advancing at an immeasurable speed, and it will not wait for people to wake up and make better decisions for themselves. Social media platforms will not adjust themselves to the needs of the time, as they are markets, and all they care about is what is bought, which is the thing that should be sold. If people are buying the emotional support AI, then there will be multiple chatbots with attention-grabbing titles.

An individual might take it as a joke or play with it for fun, but what they do not realize is that they are providing their personal and sensitive information to a machine whose data can be sabotaged. People nowadays, without realizing, would jump on the ongoing trends without realizing what it will do to their data. The trend of Ghibli-style photos, where photos were being generated to the extent that it led to the melting of OpenAI’s servers, prompted the company to temporarily implement rate limits. In addition to that, it resulted in an intellectual property issue involving Studio Ghibli centers. As it mimicked the iconic style of Studio Ghibli, which has been working for decades, AI stole the art, and there was no genuine accountability. This is how dangerous it gets: stealing someone’s work and then getting away with it without being charged or held accountable. This intellectual property theft by AI resulted in Hollywood writers’ protest, leading to the establishment of the 2023 WGA AI contract. WGA (Writers Guild of America) led to AI not being treated as a writer and prevented it from getting any credit or being considered “literary material.” Where the threat is so imminent, laws are not efficient, control is lost, and profit is being generated, would you really let bots decide what you will do in your life?

Published on
12/02/2026 – 14:57 GMT+1

European shares extended gains to new highs by early afternoon on Thursday, as strong corporate earnings from luxury and industrial groups fuelled a broad rally across the region’s equity markets.

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The pan-European STOXX 600 was up about 0.5% to 624.67 points by midday, holding near the all-time high level as investors digested a heavy slate of earnings updates.

Major benchmarks also hovered near record levels, with France’s CAC 40 up more than 1.4% on the day and London’s FTSE 100 trading around a record intraday high near 10,535 points.

Luxury stocks were among the biggest drivers of gains, with the sector rising about 1.5%.

Shares in Hermès climbed to a near one-month high after the French fashion house reported stronger-than-expected quarterly sales, backed by robust demand in the United States and Japan.

The results helped lift sentiment across the high-end consumer segment, which has faced concerns over slowing growth in China and more cautious spending among middle-income shoppers.

AI-adjacent industries jump

Industrial companies linked to artificial intelligence and data-centred demand were another key pillar of the rally.

French electrical equipment maker Legrand jumped about 5.8% after reporting strong demand tied to data-centre projects.

German engineering giant Siemens also rose sharply, climbing more than 6% after raising its full-year profit outlook, citing strong orders linked to AI-driven automation and digital infrastructure.

Analysts say the surge in AI-related industrial stocks reflects expectations that global spending on data centres, automation and electrification, will continue to accelerate as companies invest heavily in artificial intelligence capacity.

Stronger-than-expected corporate earnings updates were seen as the main catalyst for the rally.

Broader market sentiment was also supported by a robust US jobs report, which eased concerns about a slowdown in the world’s largest economy and reinforced expectations that growth will remain steady.

Were you ready for some non-football consumerism? Ready or not, the Super Bowl’s annual blitz of commercials landed before and during the Seattle Seahawks and New England Patriots defense-first matchup, with some ads served up in advance while others were unveiled for the first time during the game. As in previous years, there were serious clunkers (looking at you Bud Light rolling keg ad), but also a few that transcended their buy-more mission (may you live forever, Melissa McCarthy). Other trends we noticed: celebrities double dipping to appear in more than one Super Bowl commercial (three if you’re Sofía Vergara), lots of borderline-gross humor (exploding heads, singing clumps of shaved body hair, singing toilets and plenty of ads trying to convince America that artificial intelligence tools aren’t a waste of time and energy).

While many of this year’s ads promoted AI and the usual rah-rah-America nods to patriotism, one trend we noticed was that the longer versions for some of the best Super Bowl ads, found online, were even better than the condensed cuts that made it to broadcast. What if next year, we make the Super Bowl three quarters and the commercial breaks 15 minutes long? Any takers?

While we wait for that brilliant idea to make it to the NFL’s offices, here are the big game ads we loved the most and a few that fumbled the ball — big time.

Travellers are being warned to double check information generated by AI after tourists showed up to an attraction that didn’t exist after reading about it on a travel company’s website

Tourists who travelled to a remote Tasmanian town were left disappointed when they found out the attraction they were visiting didn’t exist and had been invented by AI.

In a blog post published in July 2025, which has since been deleted, travel company Tasmania Tours posted a list of the ‘7 Best Hot Springs Tasmania Experiences for 2026’. Among the list was Weldborough Hot Springs, and the post promised an off-the-beaten-path experience, saying: “Its reputation as a tranquil haven has made it a favourite among local hiking groups, wellness retreat organisers, and anyone wanting to experience one of the more untouched hot springs Tasmania has to offer.”

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The article was even accompanied by an AI-generated image of a man backpacking along a bright blue river, with steam rising from the surface.

While it looked and sounded enticing, there was a big drawback: Weldborough Hot Springs does not exist. While Weldborough is without a doubt a beautiful part of Tasmania that offers hiking trails through lush green forests, those hoping for a healing dip may be disappointed when they enter the rather chilly waters of the River Weld.

Much to the amusement of locals in the small town, tourists soon started arriving, hoping to find these mythical hot springs. Speaking to the Australian Broadcasting Corporation (ABC), local pub owner Kristy Probert says she gets daily phone calls and visits from people trying to find out more about the springs.

She revealed that people have been travelling far and wide to find the springs. “I actually had a group of 24 drivers turn up there two days ago that were on a trip from the mainland, and they’d actually taken a detour to come to the hot springs. I said, ‘If you find the hot springs, come back and let me know and I’ll shout you beers all night’ — they didn’t come back,” she joked.

ABC spoke to Scott Hennessey, owner of Australian Tours and Cruises, which operates Tasmania Tours who admitted: “Our AI has messed up completely.” before explaining that marketing materials were created by a third party.

Scott said that posts, which he would usually review, were accidentally made public when he was out of the country. He told ABC: “We don’t have enough horsepower to write enough content on our own, and that’s why we outsource part of this function.”

He added: “We’re trying to compete with the big boys. Part of that is you’ve got to keep your content refreshed and new all of the time. We’re not a scam. We’re a married couple trying to do the right thing by people … We are legit, we are real people, we employ sales staff.”

It’s not the first time tourists have been fooled by AI. In late 2025, images began circulating on Instagram of an elaborate Christmas market at Buckingham Palace, showing the historic building decked in Christmas lights and stalls set up inside its iconic gates.

However, it was soon revealed to be an AI image, and the Royal Collection Trust had to put out a statement confirming that no such event was planned on the palace grounds.

And it’s not just fake images that holidaymakers need to be aware of. A video circulated on social media in Malaysia showing an amazing new attraction called the Kuak Skyride, a cable car offering spectacular views across the mountains. A couple reportedly travelled across the country to the town of Pengkalan Hulu only to find out no such attraction exists.

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ABC also spoke to Professor Anne Hardy, who works for Destination Southern Tasmania and is a tourism expert. She claimed that AI ‘hallucinations’ will make this kind of situation much more common in the future.

“What we know is that now about 90 per cent of itineraries that are generated by ChatGPT actually have at least one error in them, and we also know that 37 per cent of people rely on AI to generate their itineraries,” she said.

Australian Tours and Cruises has been contacted for comment.

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