U.S. artificial intelligence companies are expected to spend $650 billion on capital investments this year, mostly in the form of data center infrastructure. The companies clearly believe that the demand for AI services is at an inflection point. But the scale of their spending raises macroeconomic questions.

Does this level of AI investment amount to a fiscal stimulus for the United States? What ripple effects is AI already having on the U.S. economy? Is this what an economic bubble looks like?

U.S. artificial intelligence companies are expected to spend $650 billion on capital investments this year, mostly in the form of data center infrastructure. The companies clearly believe that the demand for AI services is at an inflection point. But the scale of their spending raises macroeconomic questions.

Does this level of AI investment amount to a fiscal stimulus for the United States? What ripple effects is AI already having on the U.S. economy? Is this what an economic bubble looks like?

Those are just a few of the questions that came up in my recent conversation with FP economics columnist Adam Tooze on the podcast that we co-host, Ones and Tooze. What follows is an excerpt, edited for length and clarity. For the full conversation, look for Ones and Tooze wherever you get your podcasts. And check out Adam’s Substack newsletter.

Cameron Abadi: Historically, what other businesses have invested on this level on this sort of time scale?

Adam Tooze: To place this in perspective, the U.S. economy last year was $30 trillion. So the planned investment of $650 billion for the coming year is about 2 percent of GDP. And that puts us in the ballpark of previous tech booms in the United States. This is a really large share of GDP.

We’re not quite at the level of the railway booms of the 19th century, let alone really large wartime spending or the really exorbitant private sector booms that we saw, for instance, in Japanese real estate in the 1980s. But a level of spending rising from half a percentage point of GDP to 1.5 percentage points to closer to 2 percent is clearly a major jolt to the U.S. economy in a positive sense.

CA: Does this level of investment amount to a fiscal stimulus for the United States?

AT: That’s the right way of thinking about it. In a Keynesian logic, investment and government spending are both what’s called exogenous shocks—exogenous impulses to economic growth. In this particular case, it is instructive because it’s essentially being funded through various types of private credit and the mobilization of cash by........

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