Martin Wolf: AI buildout at 3.6% of US GDP raises the risk of a bust (opens the source in a new tab)
- Martin Wolf draws on a new Brookings paper by Columbia's Stijn Van Nieuwerburgh, which projects US spending on the AI buildout at 3.6% of GDP a year to 2032, a bigger sector boom than the railways of the late 1800s.
- Big Tech's spending is now outrunning its cash flow, he notes, so data-centre developers, infrastructure funds and Private credit Loans made by investment funds instead of banks, usually less regulated and less visible. are filling the gap, much of it through loans outsiders can barely see.
- His bigger worry is stocks: US valuations sit where they have historically come before crashes, and the longer the boom and the financial engineering run, the harder the landing.
- 3.6%
- of US GDP a year on the AI buildout, 2025-32
Why it matters When one theme props up growth, profits and share prices at once, a stall hits jobs, lenders and portfolios together, including Indians who hold US tech through global funds.
Other side Booms that end in busts often leave useful infrastructure behind, and if AI profits arrive fast enough today's spending will look prudent. Wolf himself grants AI may still prove transformative.