The AI Capex spending race is so large that it lifts the entire US economy.
Researchers at Pantheon Macroeconomics found that AI-related spending accounts for 0.5 percentage points difference in annual GDP growth in the first half of the year. Without AI spending, the Pantheon estimated that the US economy would have grown at less than 1%.
“But, while hiding behind the surge in AI-related spending, investments elsewhere in the economy are much softer than the numbers in the headline,” wrote Samuel Tomb, the Pantheon chief economist, and Oliver Allen, the Pantheon senior US economist, in a recently released report.
It doesn’t seem like tech companies are slowing down their spending anytime soon.
Amazon, which spent $48.4 billion on capital investments in 2023, is more than doubled this year. Google raised an eyebrow, pledging to spend another $10 billion. Microsoft recently reported that it has pledged too much to drive Capex spending ahead of Analyst’s expectations. Even apples, often considered the most frugal in bundles, exceed their previous spending rates.
“Big Tech’s plan to actively spend on AI over the next few years suggests a similar boost for the rest of 2025 and 2026,” the analyst wrote.
Top CEOs, including Nvidia’s Jensen Huang, have praised President Donald Trump’s AI plan, aiming to further fuel investments in US spending.
As Business Insider previously reported, data center construction is on the rise. Beyond the enormous costs of construction, there are also important spending related to the large amount of energy and water needed to power and maintain the data center.
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According to a Pantheon study, software spending is actually accelerating the majority of GDP boost. Data center construction and energy spending is solid, but it is not enough to “shift the dial” in software ways. The US imports 80% of its computer equipment, so spending on GDP, where imports count against growth, has a less net effect on GDP.
“We thought the leap in investment in high-tech equipment into the first quarter was primarily a reflection of the rush of purchases before tariffs, but as imports of other goods setbacks, it retains second quarter profits and suggests sustained climbing,” the analyst wrote.
Pantheon’s report focused on fixed investments such as computers, communications equipment, and centers, and ruled out Talent, the other part of the AI race. Meta, led by CEO Mark Zuckerberg, is reportedly trying to poach top AI researchers with a $100 million offer.
Researchers say that behind AI spending is the soft economy behind it. Pantheon analysts said pricing data shows retailers and wholesalers continue to be under pressure from tariffs.
Their findings earned doveTail in recent comments by top CEOs. This shows that big companies like Walmart and Nike are already raising prices or will soon rise. The unfortunate work in July only raised concerns that the labour market could be weaker than previously thought.
Panetton concludes that the overall economy will lead to a quick cut in the Federal Reserve system. Because of Trump’s frustration, the central bank has so far stabilized the rates in the waiting approach of Chairman Jerome Powell.
