by Patrick Fearon-Hernandez, CFA, and Thomas Wash

[Posted: 9:30 AM ET] | PDF

Our Comment opens with our assessment of Chair Warsh’s newly announced task force and the group of experts selected to lead it. We then examine the White House’s push to have foreign chipmakers expand manufacturing capacity in the US. Next, we briefly cover the latest developments in the US, including relations with Iran and recent reports of AI companies providing services to blacklisted entities. As always, we include a review of recent domestic and international economic data.

The Task Force: Fed Chair Kevin Warsh has released a list of names of people who will be tasked with reshaping the Federal Reserve’s operational framework. The group will focus on five key reform areas identified by Warsh: inflation targeting, communication strategy, balance sheet management, data utilization, and the interplay between productivity and employment. The initiative aims to deliver research by year-end, potentially paving the way for significant institutional reforms. However, skeptics remain unconvinced that the task force will provide any meaningful insights.

• Warsh is driving the task force initiative to address two key concerns: the Fed’s recent credibility gaps and the disruptive impact of AI. He cites the “transitory” inflation misstep and the failure to hit the target as clear evidence of lost trust. He also worries that the existing framework is poorly equipped for an AI-altered world, and that conventional surveys may not detect shifts quickly enough to inform policy.
• The newly formed task force comprises a cross-section of experts from both the public and private sectors. Among the most prominent public-sector appointees are former Bank of England Governor Mervyn King, ex-Reserve Bank of India Governor Raghuram Rajan, former Fed Governor Jeremy Stein, and noted economic advisor Greg Mankiw. On the private side, the group includes venture capitalist Marc Andreessen and Chad Jones, a leading AI economist at Anthropic.
• While the task force boasts an impressive roster of names, questions linger over whether it can generate genuinely novel insights for the Federal Reserve. In 2025, the central bank completed a five-year review of its strategy, tools, and communications — an exercise that overlaps significantly with the very areas this task force seeks to address. Moreover, the five-month timeline allocated for this new research has raised doubts about whether a sufficiently comprehensive review is even feasible.
• That said, while there are still questions about the task force itself, markets appear to retain confidence in Chair Warsh. Bond market volatility has begun to ease, suggesting that investors view his proposed direction — at least in terms of the goals he has articulated — as broadly credible. As a result, we think this task force is likely to help restore some confidence in the Fed, even if it ultimately falls short of delivering a sweeping set of structural reforms.

Chip Onshoring: The US continues to press foreign companies to expand investment domestically as it seeks to boost its chipmaking capacity. Commerce Secretary Howard Lutnick has implicitly urged Samsung and SK Hynix to increase their US memory chip production in order to help ease emerging supply shortages. His comments underscore that the AI investment cycle has become so dominant that the administration is unwilling to rely solely on US firms, a stance that could intensify competitive pressure on domestic chipmakers.

• During a Micron-hosted event, Lutnick urged South Korean chipmakers to accelerate efforts to expand production in the United States. He acknowledged that greater participation from firms such as Samsung and SK Hynix could intensify competition for domestic players like Micron but argued that a broader manufacturing base would help create a more resilient supply chain for US companies dependent on advanced memory chips.
• His comments come as SK Hynix and Samsung have emerged as major beneficiaries of the AI infrastructure boom. In recent months, US imports of memory chips from South Korea have surged as demand has far outstripped domestic supply. The strength of this cycle has led SK Hynix and Samsung to commit to massive capacity expansion plans, running into the hundreds of billions of dollars, in an effort to keep pace with the current shortfall.
• Lutnick’s comments on South Korean firms expanding manufacturing in the US point to a broad, “big‑tent” approach to building out domestic chip capacity. While the White House remains keen to support homegrown players such as Micron and Intel, it also wants to reduce vulnerability to supply chains centered outside US borders by encouraging allied foreign producers to localize more production. Therefore, this could be a sign that the US may start to target chip firms that are not invested in the US.
• We see the US push to have foreign chipmakers invest domestically as a clear example of a more hands‑on governmental approach to the economy. Over time, this is likely to foster tighter coordination between the public sector and firms in strategic industries. While such policies may be supportive in the current boom, they could leave domestic companies relatively more disadvantaged in a downturn, as added capacity and competition weigh more heavily on local producers.

Ceasefire On? Iran and the US appear to be continuing talks even as tensions remain elevated. A US official has indicated that the two sides have begun technical discussions. While there were clashes earlier in the week, the pause in negotiations was reportedly tied to Iran’s funeral ceremonies for the ayatollah killed in the initial strikes. The fact that dialogue is ongoing is likely to help ease fears of a broader conflict between the two countries.

AI Crosshairs: OpenAI and Google were reported to have supplied AI services to blacklisted Chinese firms, activity that was legal under current rules but has raised national security concerns. Officials have signaled that such dealings could put future government contracts at risk, increasing pressure on providers to police access more aggressively. OpenAI has since moved to restrict access from mainland China, and Alphabet has disputed any wrongdoing, but the episode is likely to spur calls for stricter limits on AI exports and usage.

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