The Peter Zeihan Podcast Series - The Death of the US Tech Sector: Part 2 || Peter Zeihan

Episode Date: December 21, 2025

Continuing our discussion on the US tech sector, let's break down how demographics and rising capital costs are stifling innovation. The tech boom relied upon a few things: a young, highly-skilled workforce concentrated in hubs like Silicon Valley and cheap and abundant capital. I don't know if you've noticed, but the US doesn't have the young workers or the capital environment to fund long-term tech development. Combine that with what we discussed yesterday, and you get a tech sector that is going to struggle in the years and decades to come.You're getting access to this podcast at the same time it's released on Patreon. For early access to all the videos and more, join Patreon here: https://www.patreon.com/PeterZeihan

All right, Peter Zion here, still in the Hoover, still talking about tech. We're talking about the second problem now, and that's on the front end. The tech sector isn't just about manufacturing. It's about imagining new products, imagining the future. That is primarily done, not exclusively, but primarily done in the United States in California. This is a Silicon Valley gig. Keep in mind that Silicon Valley does not do it alone. There are other places in the United States that are big on it.

Austin, of course, is a big one. Silicon Hills. Washington, D.C. is another. There's three others. I can't remember them offhand. I want to say Boston, but I can't fact-check myself right now. Anyway, what you do when you're developing a tech sector is two things. Number one, you're designing future products or you're designing and implementing building software. Both of them basically follow the same process. You get together a bunch of relatively social techno-nerds, put them together, network them together, wherever they

they happen to be, preferably in the same room, and tell them to make shit up. And they hypothesize, and then they operationalize, and then they send it off somewhere else to be turned into a manufactured product or coded software. As a rule, the U.S. tech age has boomed at the same time that this cadre of people, social tech-minded individuals, the millennials, as we like to call them, have been in their pre-child-bearing years, if that's the right way to phrase this. And because the millennials started having kids, on average, six to seven years after every generation before them, it gave a nice good run from roughly the year 2005 until very recently.

The second piece that you need in order to make this all work is just gobs and gobs and gobs of money. From the point that you rub two millennials together to see if you can get a spark, that doesn't generate any money and then they come up with the idea and that doesn't generate any money and then they build an operational plan and that doesn't generate any money then they design the product and that too

doesn't generate any money then you're talking about either doing the coding still doesn't generate money or designing the product and figuring out how to build it still no money all of those steps cost money however millennials don't come cheap especially with the skill sets that required for tech development.

So you need the cost of capital to be relatively low and the supply of capital to be as high as you can possibly imagine. And again, from roughly the year 2005 until very recently, that describes the United States to a T. The baby boomers were approaching retirement but had not yet retired, and so they were shoving all the money that they could into the retirement accounts, money was being mobilized by whoever wanted to borrow. It's one of the reasons why we had

0% car loans for so long. It's one of the reasons why subprime got so bad. The capital was so cheap. And it's one of the reasons why the tech sector enjoyed its explosive boom, everything from meta to AI. Well folks, those days are over. At this point, over two-thirds of the boomers retired. They've turned the bulk of their savings from relatively high velocity and applicable products like stocks and bonds

that could be used to lubricate the tech sector into things that are a lot less exciting like T-bills because if there is a market crash they lose and they're no longer earning income so they don't have much of a choice those that have decided to stay active in the market

well they're just stupid because the next time there's a market crash and there will always be another market crash they're going to be broke and they're going to have to move in with their kids the millennials. Imagine how that's going to go. Anywho, what this means for every industry is that the availability of capital has gone down. The cost of that capital has gone up. We've seen it in every industry. We're roughly four to five times the cost of capital today that we were five years

ago. You should expect that number to rise because remember, a third of the boomers, largest generation ever, still haven't retired. And the next generation down, my generation generation Gen X simply isn't big enough to fill the coffers. So we're facing a government fiduciary crisis as the volume of capital goes down, the cost of it goes up, that means debt servicing, for example, but it also means more expensive mortgages, as we've already seen, and less ability of the tech sector to tap capital markets on whatever terms they want. They'll still be able to issue stock, raise money that way, general capitalization, but there are fewer players in the market now. So the demand for those stocks overall has to go down. So the two big things

that have made the tech boom happen are over. The millennials have to abuse the term grown up a little bit and are more likely to have families now. And that means different sorts of jobs. It's different sorts of interactions. Also, they're no longer in their 20s. The oldest millennials are now well into their 40s. Different sort of mindset. You want the young bucks to be the one that are doing the software work, not some old codger. Yes, millennials, I just called some of you old codgers. We're not going to think about what that means for me. Anyway, combine that with more expensive money, and it's difficult to imagine simply being able to build the workforce, much less pay for it over the time horizon that is required to develop these sorts of products. So, in summation,

The future of tech don't look great. We're not going to have nearly as many breakthroughs. They're not going to come as fast. They're not going to become as gigantic. And on the back end, even if we do get some, it's going to be hard to manufacture them. We are losing the manufacturing capacity here in the United States that would be part of that process.

More of it is now going to Asia because of government policy. And when China cracks, and it will, we basically lose access to a lot of the East-East. Asian system. But if you think I'm putting this all in China, it's not just China. There's a demographic bomb going off all over East Asia, most notably in Northeast Asia. The Koreans are not all that far behind, neither of the Japanese. But the Chinese are the core of it for this decade.