Quantifying the AI boom crowding-out effect
Summary
Economists at Goldman Sachs studied how the large amount of money being spent on artificial intelligence (AI) affects other parts of the economy. They found that AI investment does reduce some other technology spending and building projects, but the overall impact on the economy is smaller than many think.Key Facts
- AI investment in 2024 is around $600 billion, about 2% of the US economy (GDP).
- This investment represents 10% of business spending on fixed assets and 15% of equipment purchases.
- Spending on AI causes some reduction in other technology purchases by big companies and those using AI services.
- Building new data centers for AI uses labor and equipment that could be used for other construction projects.
- Data centers have higher profit margins than other building projects, attracting more resources.
- Large AI-related borrowing by major tech companies has slightly increased borrowing costs for other businesses.
- The increase in borrowing costs raised them by just 0.05 percentage points and may have lowered non-AI investments by about $10 billion.
- Overall, the study suggests that the effect of AI investment on reducing other economic activity is smaller than often reported.
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