The AI Spending Boom Is Massive But Not Unprecedented

The boom in capital expenditures related to generative artificial intelligence is generating lots of questions about whether it is sustainable. Coming up with definitive answers to them is something of a fool’s errand. Quantifying the size of the capex surge seems like a more productive endeavor — and one that may offer some hints as to its sustainability.

Even that is easier said than done. After spending the better part of three days making chart after chart after chart (a small sample of which I share here), I now know that there are many different ways to quantify the AI capex boom that lend themselves to many different narratives. My general sense after this exercise is that although AI spending has reached the point of major economic significance it has yet to become quite the force that tech and telecom were in the late 1990s. Yes it is driving a large share of current US economic growth, and if it were to end suddenly there would be unpleasant consequences, but at this point there’s nothing especially alarming. At a few big tech companies, though, the spending is like nothing they’ve ever attempted. Either it pays off, or there will be some very challenging years ahead.