There’s an article (gift link) out today in The Wall Street Journal about infrastructure spending on AI and data centers. We know the stock market is fueled, dominated by the AI boom. We know about the politics of data centers. But the details here, largely based on a recent Brookings study really boggle the mind. I’m going to share two charts to illustrate the story. But the gist is that AI is already year over year the biggest infrastructure build in American history, dwarfing the US highway system, the data transmission build out for the internet, canals and being substantially bigger than the railroad buildout in the years after the Civil War. And by many measures the entire economy is now dominated by AI spending. Not only is the non-AI economy doing pretty poorly, at least showing less spending than before. But to a great degree that’s because AI spending is crowded out other spending and driving up prices. (If you’ve tried to buy a computer or computer memory recently you knows this.)
I’m going to share a few charts.
As you can see, this is annualized infrastructure spending as a percentage of GDP. With some acquaintance with economic history, once you get sufficiently far back in time, it’s hard to make perfect apples to apples comparisons about spending and GDP. But with the best numbers we have the AI build out is already the largest in all of American history – dwarfing everything but the railroads and still bigger than that.
We of course have all these debates about whether AI is a bubble, whether it can generate returns commensurate with capital expenditures. But it is certainly true that AI or LLMs are an economically unproven infrastructure investment. So these are truly wild levels of spending. And as the Journal article makes clear this is heavily weighted toward borrowed money.
The next chart is this one compared construction on AI and all other construction in the private economy. The chart really speaks for itself.
As I said, read the article. Even if you don’t have a Journal subscription, the link above is a gift link. So you should be able to read it.
