From the perspective of total factor productivity: The AI competition and Lao Deng's view of the "Era of Computing Power" [Fu Peng Says 5]

```

“Viewing the world from the trading desk, Fu Peng comments on finance.”
^{‘Fu Peng Says’ Season Six Fully Upgraded!Subscribe Now}

This year is the tenth year of WallstreetCN’s annual column “Fu Peng Says”!

Fu Peng Says Season Six is officially launched! The sixth season will be fully upgraded, adding Fu Peng’s article notes and chart interpretations in addition to the usual videos.

In addition, the course representative will also create an exclusive community for purchasers, where besides regular content, you’ll receive a daily trading focus morning report, valuable research reports, recommended e-book lists, and extended reading materials. Everyone can also ask questions and interact in the group to progress together. Subscribers, please scan the code below to add the assistant and join the exclusive group for “Fu Peng Says”.

Viewing AI through Total Factor Productivity—"The Computing Power Era" in Laodeng’s Eyes

>>This article contains only the author’s views. Click on the video above to watch! This episode was recorded on September 23, 2025.

Viewing the world from the trading desk, Fu Peng comments on finance. This episode mainly focuses on interpreting the most critical technology segment in total factor productivity.

This first chart has been used for many years, roughly starting from 2016. In 2017 and 2018, the US stock market showed a broadening triangle pattern for two to three years, and I used this chart at that time. The chart shows the relationship between US total factor productivity and the S&P Index since World War II. However, this chart is for reference only and cannot be used for actual trading due to serious data lag, but is quite valuable for research. Research shows that the driving force behind the S&P 500—and thus US stocks—is the change in total factor productivity.

Total factor productivity contains many elements: globalization increases efficiency, capital market reforms improve capital efficiency, and technological progress brings new factors. Overall, there’s a clear rhythm—between the late 1960s and the late 1970s/1980s, total factor productivity stagnated, and US stocks correspondingly stagnated; starting from the early 1980s, globalization, capital efficiency reforms, and the technological boom drove a 15-year bull market in US stocks; after the 2000 internet bubble burst, total factor productivity entered another long period of stagnation, and US stocks fluctuated widely.

In 2016, the world order changed significantly—reflected in international order, trade relations, and capital logic—and technology was budding. Based on this chart, I speculated that US total factor productivity may have started a new round of change. If so, since then the US may have entered a new stage; the S&P 500 set new post-2000 highs, marking a new beginning. Many at that time only saw social turmoil and didn’t quite believe in US total factor productivity increasing or changing. However, for any transformation, early turbulence is inevitable.

Attention is needed regarding technology factors. After 2016, for most investors, it was unclear exactly how much technology could boost productivity. Ark Invest (Cathie Wood’s company) ran its secondary market fund with a primary market mindset, aiming to capture disruptive core technologies that could create new productivity. But no one knew which technology would become the core. Thus, between 2016 and 2021, a wide-net investment approach gradually yielded good returns.

In fact, early/primary market style investing often relies on casting a wide net—venture capital essentially screens by investing broadly since no one can predict which technology will win. From 2021–2022, US stocks plunged: stocks like Nvidia fell over 50%, Ark funds dropped sharply, and Bitcoin slumped to $20,000. This stage marked a key turning point: by “killing valuations,” the most critical future technology path for total factor productivity—AI—was identified. Today, AI has become the core factor and productivity that both the US and China are betting on.

The AI industry chain is similar to that of the industrial system during the Industrial Revolution. Taking steelmaking as an example, steel is the skeleton of industry, and petrochemicals are the blood. The industrial chain has upstream, midstream, and downstream; so does AI. In steelmaking, major steel plants’ core is the blast furnace; those who produce them and set their standards are like chip designers and makers in AI. Companies producing GPUs are like those making blast furnaces; clusters of GPUs form "computing power centers,” just as blast furnaces together make a plant. To produce steel, you feed coking coal and iron ore into a blast furnace. For AI, you feed massive data into computing centers, which, following fundamental standards, generate general-purpose large models—the base iron, so to speak—for all midstream and downstream applications. Then you process large models into industry-specific models, as iron becomes different steel types. Finally, AI agents call various vertical models and applications to create workflows for all sectors.

Since 2022, with OpenAI’s ChatGPT as the core application scenario, upstream investment has accelerated. Currently, AI industry chain development is still in early stages; upstream capital expenditure is huge, assets-heavy, and could quickly become monopolistic. In addition to companies already in control, upstream is forming strategic alliances, often driven by nationalism. For example, the US government’s Intel investments, Oracle’s takeover of TikTok data, investments in OpenAI—all are rapid industry integration, reflecting national agendas to create a “giant” that can control future productivity, factors, and order. The competition in the AI industry chain between China and the US is becoming clear. For investors, the core is to invest along the AI industry chain; excess returns in US stocks largely come from this line, and its probability of leading productivity is increasing. We must seize this era’s opportunity and will continue to discuss this theme in more depth. Thank you.

Thank you for listening. I hope this was helpful, and see you next time.

“Fu Peng Says” Season Six fully upgraded! Major new launch!

Risk Warning and DisclaimerThe market carries risks, and investment requires caution. This article does not constitute personal investment advice, nor does it consider the special investment objectives, financial situations, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article fit their personal circumstances. Invest accordingly and at your own risk. ```