ALFA Notes

Good morning! In this new year, ALFA will be providing you with regular updates on Tuesday and Friday mornings on developments we find interesting and perspectives we think are worthy of your attention. If you’d like to get in touch with us, send us a line at [email protected].

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The New Guard: Trump's Defense Nominees Signal Shift Toward Innovation

In the race for technological supremacy with China, personnel choices telegraph policy intentions. President Trump's defense nominations reveal a clear pattern: bringing Silicon Valley speed and private sector innovation to the Pentagon's industrial base.

The roster reads more like a leading technology company board than traditional defense leadership. From Army Secretary nominee Dan Driscoll, an Iraq War veteran turned successful businessman, to Navy Secretary pick John Phelan, whose financial expertise could revolutionize procurement, these selections suggest a dramatic departure from the legacy military-industrial mindset.

Perhaps most telling are the paired selections of Stephen Feinberg, co-founder of Cerberus Capital, as Deputy Secretary of Defense and Emil Michael of Uber fame to lead Research & Engineering. Feinberg's private equity background signals a focus on efficiency and innovation that could reshape defense acquisition, and Michael's appointment as Undersecretary for Research & Engineering brings Uber's disruptive DNA to the Pentagon's technology development pipeline.

This emphasis on private sector innovation comes at a crucial moment. As Speaker McCarthy recently noted, "We are in a race for the future with China, and that future will be driven by Artificial Intelligence." These nominees, with their blend of military experience and private sector acumen, seem chosen specifically to work with future Defense Secretary Pete Hegseth to accelerate America's defense modernization.

Tech firms building infrastructure for long-term American AI leadership

Last week, Microsoft President Brad Smith released what they see as a roadmap for America’s leadership in artificial intelligence — calling it “the golden opportunity for American AI.”

Most notably, Microsoft announced $80 billion “to build out AI-enabled datacenters to train AI models and deploy AI and cloud-based applications around the world.” Smith notes that over half of that investment will occur right here in the U.S.

Microsoft’s announcement comes on the heels of several other datacenter commitments from leading technology companies and investors.

• Last month, investment firm Softbank, in a joint announcement with President Trump, announced a $100 billion investment in America that is said to create at least 100,000 jobs for “artificial intelligence and related infrastructure.” Softbank CEO Masayoshi Son said at the announcement “my confidence level to the economy of the United States has tremendously increased with his victory.” 

• Also in December, Meta Platforms announced plans to build a $10 billion artificial intelligence datacenter in northeast Louisiana — the largest for the company.

• xAI brought online “the most powerful AI training system in the world,” earlier this year as well.

Aside from the technological implications of these investments, there’s another piece of great significance to the American story as told by Smith …

Once online, this massive datacenter build out comes with a very big cost: more baseload power. Microsoft is already investing to meet this demand through partnerships like those with Constellation Energy and the reboot of Three-Mile Island. However, not every new datacenter has the luxury of being built near a soon-to-be recommissioned nuclear plant (and not to mention the enduring energy demand from new and existing utility customers such as homes to manufacturing plants). A framework for full scale energy deployment was outlined by Speaker McCarthy late last year.

Smith’s post builds off of a 2019 executive order from President Trump that set a framework for AI policy and American leadership. In addition to the campaign promise to repeal the Biden AI executive order, we are confident that Trump administration policy around AI will acknowledge and plan to meet the growing energy demand from AI infrastructure so that announcements like the ones above will come and stay online, and their impact will be distributed throughout the country.

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