16 ms·

AI is propping up the US economy

324 points by mempko 1y ago

0cf8612b2e1e 1y ago
Over the last six months, capital expenditures on AI—counting just information processing equipment and software, by the way—added more to the growth of the US economy than all consumer spending combined. You can just pull any of those quotes out—spending on IT for AI is so big it might be making up for economic losses from the tariffs, serving as a private sector stimulus program. Wow.
- deleted 1y ago
  [deleted]
- bravetraveler 1y ago
  Tepidly socially-acceptable welfare
- intended 1y ago
  Yes, wow. When I heard that data point I was floored.
- electrondood 1y ago
  For context though, consumer spending has contracted significantly.
- gruez 1y ago
  It's not as bad as the alarmist phrasing would suggest. Consider a toy example: suppose consumer spending was $100 and grew by $1, but AI spending was $10 and grew by $1.5, then you can rightly claim that "AI added more to the grow of the US economy than all consumer spending combined"[1]. But it's not as if the economy consists mostly of AI, or that if AI spending stopped the economy will collapse. It just means AI is a major contributor to the economy's growth right now. It's not even certain that the AI bubble popping would lead to all of that growth evaporating. Much of the AI boom involves infrastructure build out for data centers. That can be reallocated to building houses if datacenters are no longer needed. [1] Things get even spicier if consumer growth was zero. Then what would the comparison? That AI added infinitely more to growth than consumer spending? What if it was negative? All this shows how ridiculous the framing is.
  - agent_turtle 1y ago
    [flagged]
    - gruez 1y ago
      >Have you heard of the Dunning-Kruger effect? Have you heard of the disagreement hierarchy? You're somewhere between 1 and 3 right now, so I'm not even going to bother to engage with you further until you bring up more substantive points and cool it with the personal attacks. https://paulgraham.com/disagree.html https://paulgraham.com/disagree.html
      - agent_turtle 1y ago
        One of the major reasons there’s such a shortage of homes in the US is the extensive permit process required. Pivoting from data centers to home construction is not a straightforward process. Regarding the economics, the reason it’s a big deal that AI is powering growth numbers is because if the bubble pops, jobs go poof and stock prices with it as everyone tries to salvage their positions. While we still create jobs, on net we’ll be losing them. This has many secondary and tertiary effects, such as less money in the economy, less consumer confidence, less investment, fewer businesses causing fewer jobs, and so on. A resilient economy has multiple growth areas; an unstable one has one or two. While you could certainly argue that we may already be in rough shape even without the bubble popping, it would undoubtedly get worse for the reasons I listed above,
        gruez 1y ago
        >One of the major reasons there’s such a shortage of homes in the US is the extensive permit process required. Pivoting from data centers to home construction is not a straightforward process. Right, I'm not suggesting that all of the datacenter construction will seamlessly switch over to building homes, just that some of the labor/materials freed would be allocated to other sorts construction. That could be homes, amazon distribution centers, or grid connections for renewable power projects. >A resilient economy has multiple growth areas; an unstable one has one or two. >[...] it would undoubtedly get worse for the reasons I listed above, No disagreement there. My point is that if AI somehow evaporated, the hit to GDP would be less than $10 (total size of the sector in the toy example above), because the resources would be allocated to do something else, rather than sitting idle entirely. >Regarding the economics, the reason it’s a big deal that AI is powering growth numbers is because if the bubble pops, jobs go poof and stock prices with it as everyone tries to salvage their positions. While we still create jobs, on net we’ll be losing them. This has many secondary and tertiary effects, such as less money in the economy, less consumer confidence, less investment, fewer businesses causing fewer jobs, and so on. That's a fair point, although to be fair the federal government is pretty good at stimulus after the GFC and covid that any credit crunch would be short lived.
- troyastorino 1y ago
  I've seen this quote in a couple places and it's misleading. Using non-seasonally adjusted St. Louis FRED data (https://fred.stlouisfed.org/series/NA000349Q https://fred.stlouisfed.org/series/NA000349Q), and the AI CapEx spending for Meta, Alphabet, Microsoft, and Amazon from the WSJ article (https://www.wsj.com/tech/ai/silicon-valley-ai-infrastructure-capex-cffe0431 https://www.wsj.com/tech/ai/silicon-valley-ai-infrastructure...): ------------------------------------------------- Q4 2025 consumer spending: ~$5.2 trillion Q4 2025 AI CapEx spending: ~$75 billion ------------------------------------------------- Q1 2025 consumer spending: ~$5 trillion Q1 2025 AI CapEx spending: ~$75 billion ------------------------------------------------- Q2 2025 consumer spending: ~$5.2 trillion Q2 2025 AI CapEx spending: ~$100 billion ------------------------------------------------- So, non-seasonally adjusted consumer spending is flat. In that sense, yes, anything where spend increased contributed more to GDP growth than consumer spending. If you look at seasonally-adjusted rates, consumer spending has grown ~$400 billion, which might outstrips total AI CapEx in that time period, let alone growth. (To be fair the WSJ graph only shows the spending from Meta, Google, Microsoft, and Amazon. But it also says that Apple, Nvidia, and Tesla combined "only" spent $6.7 billion in Q2 2025 vs the $96 billion from the other four. So it's hard to believe that spend coming from elsewhere is contributing a ton.) If you click through the the tweet that is the source for the WSJ article where the original quote comes from (https://x.com/RenMacLLC/status/1950544075989377196 https://x.com/RenMacLLC/status/1950544075989377196) it's very unclear what it's showing...it only shows percentage change, and it doesn't even show anything about consumer spending. So, at best this quote is very misleadingly worded. It also seems possible that the original source was wrong.
- raincole 1y ago
  > growth Is the keyword here. US consumers have been spending so much so of course that sector doesn't have that much room to grow.
- lisbbb 1y ago
  That's bad because you just know at some point the bell is getting rung and then the bubble bursts. It was the same thing with office space in the late 1990s--they overbuilt like crazy predicting huge demand that never appeared and then the dot-com bubble burst and that was that.
lenerdenator 1y ago
And that's why there's a desire to make interest rates lower: cheap money is good for propping up bubbles. Now, it does that at the expense of the average person, but it will definitely prop up the bubble just long enough for the next election cycle to hit.
- thrance 1y ago
  Trump and his administration harassing the Fed and Powell over interest rates is like a swarm of locust salivating at ripened wheat fields. They want a quick feast at the expense of everything and everyone else, including themselves over the long term.
  - dylan604 1y ago
    Trump knows that the next POTUS can just reverse his decisions much like he's done in both of his at bats. Only thing is there is no next at bat for Trump (without major changes that would be quite devastating), so he's got to get them in now. The sooner the better to take as much advantage of being in control.
  - pessimizer 1y ago
    The left is almost completely unanimous in their support for lowering interest rates, and have been screaming about it for years, since the first moment they started being raised again. And for the same reasons that Trump wants it, except without the negative connotations for some reason. Recently, I've heard many left wingers, as a response to Trump's tariffs, start 1) railing about taxes being too high, and that tariffs are taxes so they're bad, and 2) saying that the US trade deficit is actually wonderful because it gives us all this free money for nothing. I know all of these are opposite positions to every one of the central views of the left of 30 years ago, but politics is a video game now. Lefties are going out of their way to repeat the old progressive refrain: > "The way that Trump is doing it is all wrong, is a sign of mental instability, is cunning psychopathic genius and will resurrect Russia's Third Reich, but in a twisted way he has blundered into something resembling a point..." "...the Fed shouldn't be independent and they should lower interest rates now."
throwmeaway222 1y ago
- Microsoft’s AI-fueled $4 trillion valuation As someone in an AI company right now - Almost every company we work with is using Azure wrapped OpenAI. We're not sure why, but that is the case.
- hnuser123456 1y ago
  Nobody gets fired for choosing Microsoft
- ElevenLathe 1y ago
  MS salespeople presumably already have weekly or monthly meetings with all the people with check-cutting authority, and OpenAI doesn't. They're already an approved vendor, and what's more the Azure bill is already really really big, so a few more AI charges barely register. It's the same reason you would use RDS at an AWS shop, even if you really like CloudSQL better. This is the main reason the big cloud vendors are so well-positioned to suck up basically any surplus from any industry even vaguely shaped like a b2b SaaS.
- guidedlight 1y ago
  It’s because most companies already have a lot of confidence with Microsoft contracts, and are generally very comfortable storing and processing highly sensitive data on Microsoft’s SaaS platforms. It’s a significant advantage. Also Microsoft Azure hosts its own OpenAI models. It isn’t a proxy for OpenAI.
- chung8123 1y ago
  All of their files are likely on a Microsoft store already too.
- edaemon 1y ago
  Lots of AI things are features masquerading as products. Microsoft already has the products, so they just have to add the AI features. Customers can either start using a new and incomplete product just for one new feature, or they can stick with the mature Microsoft suite of products they're already using and get that same feature.
- 1y ago
micromacrofoot 1y ago
This is going to be an absolute disaster, the government is afraid of regulating AI because it's so embedded in our economy now too
- jcgrillo 1y ago
  I think we're already starting to see the cracks with OpenAI drastically tightening their belt across various cloud services. Depends how long it takes to set in, but seems like it could be starting this quarter.
jackcosgrove 1y ago
I'm not sure the comparison is apples to apples, but this article claims the current AI investment boom pales compared to the railroad investment boom in the 19th century. https://wccftech.com/ai-capex-might-equal-2-percent-of-us-gdp-in-2025-while-remaining-far-below-the-peak-spending-on-rail-roads-in-the-19th-century/ https://wccftech.com/ai-capex-might-equal-2-percent-of-us-gd... > Next, Kedrosky bestows a 2x multiplier to this imputed AI CapEx level, which equates to a $624 billion positive impact on the US GDP. Based on an estimated US GDP figure of $30 trillion, AI CapEx is expected to amount to 2.08 percent of the US GDP! Do note that peak spending on rail roads eventually amounted to ~20 percent of the US GDP in the 19th century. This means that the ongoing AI CapEx boom has lots of legroom to run before it reaches parity with the rail road boom of that bygone era.
- decimalenough 1y ago
  There is obvious utility to railroads, especially in a world with no cars. The net utility of AI is far more debatable.
  - gruez 1y ago
    >The net utility of AI is far more debatable. I'm sure if you asked the luddites the utility of mechanized textile production you'd get a negative response as well.
    - shadowgovt 1y ago
      With this generation of AI, it's too early to tell whether it's the next railroad, the next textile machine, or the next way to lock your exclusive ownership of an ugly JPG of a multicolored ape into a globally-referenceable, immutable datastore backed by a blockchain.
    - decimalenough 1y ago
      Railroads move people and cargo quickly and cheaply from point A to point B. Mechanized textile production made clothing, a huge sink of time and resources before the industrial age, affordable to everybody. What does AI get the consumer? Worse spam, more realistic scams, hallucinated search results, easy cheating on homework? AI-assisted coding doesn't benefit them, and the jury is still out on that too (see recent study showing it's a net negative for efficiency).
asdev 1y ago
look at the S&P 500 chart when ChatGPT came out. We were just on our way to flushing out the Covid excess money and then the AI narrative saved the market. AI narrative + inflation that is definitely way more than reported is propping up this market.
- hdgvhicv 1y ago
  It amazes me when people say figures are wrong, but fail to provide alternative figures which widely differ from published ones. Often it comes down to arguing the “basket of goods” is wrong rather than the individual components, or perhaps that there are wider rates in specific areas.
rglover 1y ago
> There could be a crash that exceeds the dot com bust, at a time when the political situation through which such a crash would be navigated would be nightmarish. If the general theme of this article is right (that it's a bubble soon to burst), I'm less concerned about the political environment and more concerned about the insane levels of debt. If AI is indeed the thing propping up the economy, when that busts, unless there are some seriously unpopular moves made (Volcker level interest rates, another bailout leading to higher taxes, etc), then we're heading towards another depression. Likely one that makes the first look like a sideshow. The only thing preventing that from coming true IMO is dollar hegemony (and keeping the world convinced that the world's super power having $37T of debt and growing is totally normal if you'd just accept MMT).
- Hikikomori 1y ago
  Ai bubble, economy in the trash already, inflation from tariffs. Dollar might get real cheap when big holders start selling stocks and exchanging it, nobody wants to be left holding their bag, and they have a lot of dollars. Which is their (Thiel, project2025, etc) plan, federal land will be sold for cheap.
  - decimalenough 1y ago
    Selling stocks for what? If the dollar is going down the toilet, the last thing you want to have is piles of rapidly evaporating cash.
    - marcusestes 1y ago
      Never totally discount _deflationary_ scenarios.
      - heathrow83829 1y ago
        based on my understanding of what all the financial pros are saying: they'll never let that happen. they'll inflate away to the moon before they allow for a deflationary bust. that's why everyone's in equities in the first place. it's almost insured, at this point.
Animats 1y ago
"Over the last six months, capital expenditures on AI—counting just information processing equipment and software, by the way—added more to the growth of the US economy than all consumer spending combined." If this isn't the Singularity, there's going to be a big crash. What we have now is semi-useful, but too limited. It has to get a lot better to justify multiple companies with US $4 trillion valuations. Total US consumer spending is about $16 trillion / yr. Remember the Metaverse/VR/AR boom? Facebook/Meta did somehow lose upwards of US$20 billion on that. That was tiny compared to the AI boom.
- rockemsockem 1y ago
  Tbf I think most would say that the VR/AR boom is still ongoing, just with less glitz. Edit: agree on the metaverse as implemented/demoed not being much, but that's literally one application
  - Macha 1y ago
    Honestly, VR/AR is a small gaming peripheral business, like joysticks and third party controllers. And their are companies that make that their thing and make money from it, but it was never going to be profitable enough to be the thing that a company the size of Facebook pivots to, which I could see being a consumer in the space before Facebook got in and after too. Don't get me wrong, VRChat and Beat Saber are neat, and all the money thrown at the space got the tech advanced at a much faster rate than it would have organically have done I'm the same time (or potentially ever). But you can see Horizon's attempt to be "VRChat but a larger more profitable business" to see how the things you would need to do to monetise it to that level will lose you the audience that you want to monetise.
- keeda 1y ago
  I posted a comment yesterday regarding this with links to a couple relevant studies: https://news.ycombinator.com/item?id=44793392 https://news.ycombinator.com/item?id=44793392 -- briefly: * Even with all this infra buildout all the hyperscalers are constantly capacity constrained, especially for GPUs. * Surveys are showing that most people are only using AI for a fraction of the time at work, and still reporting significant productivity benefits, even with current models. The AGI/ASI hype is a distraction, potentially only relevant to the frontier model labs. Even if all model development froze today, there is tremendous untapped demand to be met. The Metaverse/VR/AR boom was never a boom, with only 2 big companies (Meta, Apple) plowing any "real" money into it. Similarly with crypto, another thing that AI is unjustifiably compared to. I think because people were trying to make it happen. With the AI boom, however, the largest companies, major governments and VCs are all investing feverishly because it is already happening and they want in on it.
kogasa240p 1y ago
Surprised the SVB collapse wasn't mentioned, the LLM boom gained a huge amount of steam right after that happened.
deleted 1y ago
[deleted]
johng 1y ago
There has to be give and take to this as well. The AI increase is going to cost jobs. I see it in my work flow and our company. We used to pay artists to do artwork and editors to post content. Now we use AI to generate the artwork and AI to write the content. It's verified by a human, but it's still done by AI and saves a ton of time and money. These are jobs that normally would have gone to a human and now go to AI. We haven't paid a cent for AI mind you -- it's all on the ChatGPT free tier or using this tool for the graphics: https://labs.google/fx/tools/image-fx https://labs.google/fx/tools/image-fx I could be wrong, but I think we are at the start of a major bloodbath as far as employment goes.... in tech mostly but also in anything that can be replaced by AI? I'm worried. Does this mean there will be a boom in needing people for tradeskills and stuff? I honestly don't know what to think about the prospects moving forward.
gamblor956 1y ago
This is backwards. The AI bubble is so big that it's draining useful investment from the rest of the economy. Hundreds of thousands of people are getting fired so billionaires can try to add a few more zeros to their bank account. The best investment we can make would be to send the billionaires and AI researchers to an island somewhere and not let them leave until they develop an AI that's actually useful. In the meanwhile, the rest of us get to live productive lives.
- agent_turtle 1y ago
  There’s no evidence of AI causing layoffs. There’s lots of evidence of CEOs using AI as a scapegoat to entice investors: https://apnews.com/article/ai-layoffs-tech-industry-jobs-ece82b0babb84bf11497dca2dae952b5# https://apnews.com/article/ai-layoffs-tech-industry-jobs-ece...
  - add-sub-mul-div 1y ago
    Discounting the evidence of it being explicitly cited as a reason for layoffs and that its purpose to business is to replace human labor, there's no evidence that its replacing human labor. Got it.
    - rockemsockem 1y ago
      Citing AI for layoffs is great cover for "we over hired during Covid". There probably are a few nuts out there that actually fired people to be replaced with AI, I feel like that won't go well for them There really is no evidence.
      - no_wizard 1y ago
        There's strong sentiment bubbling that supports AI driven layoffs are going to happen or are happening[0]. I'll say its okay to be reserved on this, since we won't know until after the fact, but give it 6-12 months, then we'll know for sure. Until then, I see no reason not to believe there is a culture in the boardrooms forming around AI that is driving closed door conversations about reducing headcount specifically to be replaced by AI. [0]: https://gizmodo.com/the-end-of-work-as-we-know-it-2000635294 https://gizmodo.com/the-end-of-work-as-we-know-it-2000635294
BigglesB 1y ago
I also wonder the extent to which "pseudo-black-box-AI" is potentially driving some of these crazy valuations now due to it actually being used in a lot algorithmic trading itself... seems like a prevalence of over-corrected models, all expecting "line go up" from recent historical data would be the perfect way to cook up a really "big beautiful bubble" so to speak...
xg15 1y ago
So what will happen to all those massive data centers when the bubble bursts? Back to crypto?
- GianFabien 1y ago
  After the dot bomb of 2000, the market got flooded with CISCO and Sun gear for pennies on the dollar. Lots of post 2000 startups got their gear from those auctions and were able to massively extend their runway. Same could happen again.
  - dboreham 1y ago
    Aeron chairs too.
GianFabien 1y ago
There's only two reasons to buy stocks: 1) for future cashflows (aka dividends) derived from net profits. 2) to on-sell to somebody willing to pay even more. When option (2) is no longer feasible, the bubble pops and (1) resets the prices to some multiple of dividends. Economics 101.
- Nition 1y ago
  Just like land :)
- heathrow83829 1y ago
  yes, but there will always be a #2 with QE being normalized now.
- dehrmann 1y ago
  > ...resets the prices to some multiple of dividends But wouldn't you want to pay more for a company that has a history of revenue and income growth than one in a declining industry? And you have to look at assets on the company's books; you're not just buying a company, you're buying a share of what it owns. What if it has no income, but you think there's a 10% chance it'll be printing money in 5 years? That's why prices won't naively reset to a multiple of ~~dividends~~ income (see the dividend irrelevance theory) across the board. Someone will always put a company's income in context.
HocusLocus 1y ago
If AI gets us into orbit ( https://news.ycombinator.com/item?id=44800051#44804687 https://news.ycombinator.com/item?id=44800051#44804687 ) or revitalizes nuclear, I'm fine with those things. It's true that AI usage can scale with availability better than most things but that's not a path to world domination.
- BriggyDwiggs42 1y ago
  Is the linked post referring to literal orbit? Hell will freeze over before orbital datacenters make sense (assuming no antigrav etc gets invented tomorrow).
m0llusk 1y ago
Interesting piece, but the idea that this guy understands how oligarchs think seems way off. Jack Welch took General Electric from a global leader to a sad bag holder and he and his fans cheered progress with every positive quarterly report.
throw0101d 1y ago
From a few weeks ago, see "Honey, AI Capex is Eating the Economy" / "AI capex is so big that it's affecting economic statistics" (365 points by throw0101c 18 days ago | hide | past | favorite | 355 comments): * https://paulkedrosky.com/honey-ai-capex-ate-the-economy/ https://paulkedrosky.com/honey-ai-capex-ate-the-economy/ * https://news.ycombinator.com/item?id=44609130 https://news.ycombinator.com/item?id=44609130
diogenescynic 1y ago
They've been saying the same thing about whatever the trend of the moment is for years. Before this it was Magnificent 7 and before that it was FANG, and before that it was something else. Isn't this just sort of fundamental to how the economy works?
morpheos137 1y ago
Imagine, the world's biggest economy propped up by hopes and dreams. Has anyone successfully monetized "AI" at a scale that generates a reasonable return on investment?
jus3sixty 1y ago
The article's comparison to the 19th century railroad boom is pretty spot on for how big it all feels, but maybe not so much for what actually happened. Back then, the money poured into building real stuff like actual railroads and factories and making tangible products. That kind of investment really grew the value of companies and was more about creating actual economic value than just making shareholders rich super fast.
- johncole 1y ago
  While some of the investment in railroads (and canals before it, and shipping before that) was going into physical assets of economic value, there were widespread instances of speculation, land "rights" fraud, and straight up fraud without any economic value added.
- dehrmann 1y ago
  > Back then, the money poured into building real stuff Its limitations are well-documented, but cutting-edge AI right now is very much "real stuff."
- satyrun 1y ago
  You have no idea what you are talking about. The amount speculation and fraud from this time period would make even the biggest shit coin fraud blush. Try a biography of Jay Gould if you want more information.
poopiokaka 1y ago
You lost me at 404 wanna be event. 13 viewers looking ass
akomtu 1y ago
More like the corpos are really excited about the post-human AI future, so they are pouring truckloads of money on it and this raises the GDP number. The well-being of the average folk is in decline.
- BriggyDwiggs42 1y ago
  I think the corpos are excited for a new source of meaningful revenue growth.
tharmas 1y ago
Here's a comprehensive explanation of the coming employment apocalypse as a result of AI: Post-Labor Economics Lecture 01 - "Better, Faster, Cheaper, Safer" (2025 update) https://www.youtube.com/watch?v=UzJ_HZ9qw14 https://www.youtube.com/watch?v=UzJ_HZ9qw14
neuroelectron 1y ago
As designed
IAmGraydon 1y ago
Seems like the title should be “AI hype is propping up US company valuations.”
nowittyusername 1y ago
Correction ... Nvidia is propping up the economy. its like 24% of the tech sector and is the only source of gpus for most companies. This is really , really bad. Talk about all eggs in one basket. If that company was to take a shit, the domino effect would cripple the whole sector and have unimaginable ramifications to the US economy.
knowitnone2 1y ago
yes and no. AI may be propping up some tech companies who make items in the AI space but the number of jobs lost due to AI is pretty overwhelming. I spent the last week using LLMs to build an app using libraries I am unfamiliar with. It was amazing - to the point where I won't have to write a line of code anymore. These developers probably have some money saved up but that'll dry up. Plus the new grads are now competing against people with some experience. Tariffs + inflation + a presidential grifter = bad times.
- jaimex2 1y ago
  It's all fun and games till the LLM can't fix the issue it created. It can regurgitate and mash up all the blog tutorials that exist online but eventually it'll come across a new problem and it'll be sweet out of luck. Vibe coding is great for Shanty town software and the aftermath from storms is equally entertaining to watch.
  - imiric 1y ago
    It is terrifying whenever a vibe coder publishes an app or service that gains users. It's celebrated and seen as an example of what AI tools can accomplish. Until the inevitable security "breach" happens a few weeks later because they left the front door open. The scary thing is that these tools are now part of the toolset of experienced developers as well. So those same issues can and will happen to apps and services that used to take security seriously. It's depressing witnessing the average level of quality in the software industry go down. This is the same scenario that caused mass consumer dissatisfaction in 1983 and 2000, yet here we are again.
jaredcwhite 1y ago
I'm genuinely scared of what the crash will do to society. As much as I loathe AI boosterism, I'm starting to think my personal desire for schadenfreude may not outweigh the fear that I and everyone else I care about will get swept under the tsunami of the bubble burst.
- rapsey 1y ago
  If you are worried about a stock market crash, the current AI boom is absolutely nothing compared to the dotcom boom. Also because so many companies are staying private, a crash in private markets is relatively irrelevant for the overall economy.
  - bad_username 1y ago
    The Buffett indicator is larger than in 2000. Schiller PE ratio is getting close.
    - rapsey 1y ago
      What these things fail to take into account is the growth in the amount of money going into the stock market. Simplifying an economic activity down to a single short formula leaves out a lot of important parameters and these kinds of things tend to hold some truth for the time they are invented and often break at some point in the near future after they are created. This is because of changes in money flows in the economy as a result of tax, regulation and technology changes. Like the yield curve inversions and the Sahm rule and so on.
antman 1y ago
Althought we know that there is no empirical evidence for trickle down economy, a worst case scenario was that some of the profit would be allocated to be cost of labor and through great economy expansion and regardless of rising inequality and some reskilling, innovation and its effect on the rise of the economy was at least somewhat positive for everybody. This will not be the case anymore. There is no labor restructuring to be made, the lists for the future safe jobs are humorous to say the least. There has been a difficulty in finding skilled labor in sustainable wages for the companies and that has been highlighted as a key blocker for growth. Econony will rise by removing this blocker by AI. Rise of the economy due to AI invalidates old models and trickle down spurious correlations. Rise of the economy through AI directly enables the most extreme inequality and no reflexes or economics experience exists to manage it. There have been many theories for revolutions, social financial ideological and others. I will not comnent on those but I will make a practical observation: It boils down to the ratio of controlers vs controlled. AI also enables an extremely minimal number of controllers through the AI managment of the flow information and later a large number of drones can keep everyone at bay. Cheaply, so good for the economy.
- ryao 1y ago
  > there is no empirical evidence for trickle down economy I usually avoid responding to remarks like this because they risk forays into politics, which I avoid, but the temptation to ask was too great here. What do you consider computers, cellphones, air conditioners, flat screen TVs and refrigerators to be? The first ones had outrageous prices that only the exorbitantly wealthy could afford. Now almost everyone in the US has them. They seem to have trickled down to me.
  - neom 1y ago
    OP is talking about this: https://www.investopedia.com/terms/t/trickledowntheory.asp https://www.investopedia.com/terms/t/trickledowntheory.asp You're talking about this: https://ideas.repec.org/p/wrk/warwec/270.html https://ideas.repec.org/p/wrk/warwec/270.html :)
    - 1y ago
PicassoCTs 1y ago
So if the whole of the old economic elite goes fully catatonic, hiding in server farms from the desert of the real whispering "singularity" while rocking back and forth- will there spring up a new economic elite that is willing to deal with realities as they are?
digitcatphd 1y ago
I have started to notice this as well over the past several months, in-fact, I would say it is orders of magnitude larger than the Crypto bubble and when it bursts will be significantly more impactful. Right now, everything is propped up on the premise the hyperscalers will grow EPS proportionately to their investment and that ROA is being priced in as a best case scenario (hope) in their share price. Maybe its not ROA at all, maybe its simply FOMO, we keep citing this 'AI Race' as if there is some end objective to 'win' drawing parallels to the nuclear arms race that only resulted in massive wasted CAPEX in decaying nukes sitting in unused bunkers since the cold war. (Not to mention it isn't even clear this arms race played a direct factor in the war beside depleting resources) Everyone is happy right now. Execs get stock bonuses, investors get returns, vendors get contracts. Once this is questioned, and history demonstrates it undoubtedly will be, it will cause a cascading collapse. History is a mathematical truth.
- ubercore 1y ago
  The usable amount of AI, no matter how optimistic you are about current progression, has to be below the projections the entire AI economy is living on right now.
  - Matthyze 1y ago
    A considerable group of people think AGI or even ASI is right around the corner
    - caleb-allen 1y ago
      Sure, just as a considerable group of alchemists believed the recipe for gold was right around the corner
      - jayGlow 1y ago
        technically we can turn lead into gold now though it's not economical or scalable. so the alchemist were proven right in the end.
highfrequency 1y ago
> These are not railroads—we aren’t building century-long infrastructure. AI datacenters are short-lived, asset-intensive facilities riding declining-cost technology curves, requiring frequent hardware replacement to preserve margins. Neglects the most important benefit of large semiconductor spending: we are riding the Learning Curve up Moore's Law. We are not much better at building railroads today than we were in 1950. We are way better at building computers today. The GPUs may depreciate but the knowledge of how to build, connect, and use them does not - that knowledge compounds over time. Where else do you see decades of exponential efficiency improvements?
- missingdays 1y ago
  "We are not much better at building railroads today than we were in 1950." - in the US - maybe. In other countries - I doubt that's the case
DebtDeflation 1y ago
AI isn't propping up the economy. The BELIEF that AI will replace almost all labor (employees) is what's propping up the economy. Or rather, propping up the stock market. I'm not sure what kind of economy we're going to have when 99% of the income flows to 0.001% of the population.
- ckocagil 1y ago
  One only needs to look at the massive island complexes with underground bunkers the billionaires are building for themselves.
georgeplusplus 1y ago
It seems AI or AGI has become the divider between technology that is needed, vs a nice to have. I can’t think of one reason anyone really wants this right now. I prefer to deal with a human in 99% of my interactions.
mrbluecoat 1y ago
9 of today's top 30 homepage articles are about AI so I'd say it's also propping up HN.
zingababba 1y ago
AI and GLP-1 Receptor Agonists.
sriram_malhar 1y ago
The latest ponzi.
Madmallard 1y ago
What even is this? Are we just lying on the front of hacker news now? Anyone who is actually in the industry knows that this is the opposite of the truth. There are more layoffs than ever. Yea maybe it's being propped up for the richest of the rich taking advantage of leverage over speculation. Everyone else? It's just getting worse and worse. And that's what actually matters.
mikewarot 1y ago
I'm wondering what kind of technological change would be large enough to force the popping of this bubble, as opposed to the likely economic or other triggers? Would another order of magnitude decrease in the amount of compute for a model do it? Would the cost of compute falling by an order of magnitude in a black swan event? Or, perhaps Jevan's paradox[1] kicks in, and we just eat up the extra capacity in new uses. [1] https://en.wikipedia.org/wiki/Jevons_paradox https://en.wikipedia.org/wiki/Jevons_paradox

324 points by mempko 1y ago

Over the last six months, capital expenditures on AI—counting just information processing equipment and software, by the way—added more to the growth of the US economy than all consumer spending combined. You can just pull any of those quotes out—spending on IT for AI is so big it might be making up for economic losses from the tariffs, serving as a private sector stimulus program. Wow.

deleted 1y ago
[deleted]
bravetraveler 1y ago
Tepidly socially-acceptable welfare
intended 1y ago
Yes, wow. When I heard that data point I was floored.
electrondood 1y ago
For context though, consumer spending has contracted significantly.
gruez 1y ago
It's not as bad as the alarmist phrasing would suggest. Consider a toy example: suppose consumer spending was $100 and grew by $1, but AI spending was $10 and grew by $1.5, then you can rightly claim that "AI added more to the grow of the US economy than all consumer spending combined"[1]. But it's not as if the economy consists mostly of AI, or that if AI spending stopped the economy will collapse. It just means AI is a major contributor to the economy's growth right now. It's not even certain that the AI bubble popping would lead to all of that growth evaporating. Much of the AI boom involves infrastructure build out for data centers. That can be reallocated to building houses if datacenters are no longer needed. [1] Things get even spicier if consumer growth was zero. Then what would the comparison? That AI added infinitely more to growth than consumer spending? What if it was negative? All this shows how ridiculous the framing is.
- agent_turtle 1y ago
  [flagged]
  - gruez 1y ago
    >Have you heard of the Dunning-Kruger effect? Have you heard of the disagreement hierarchy? You're somewhere between 1 and 3 right now, so I'm not even going to bother to engage with you further until you bring up more substantive points and cool it with the personal attacks. https://paulgraham.com/disagree.html https://paulgraham.com/disagree.html
    - agent_turtle 1y ago
      One of the major reasons there’s such a shortage of homes in the US is the extensive permit process required. Pivoting from data centers to home construction is not a straightforward process. Regarding the economics, the reason it’s a big deal that AI is powering growth numbers is because if the bubble pops, jobs go poof and stock prices with it as everyone tries to salvage their positions. While we still create jobs, on net we’ll be losing them. This has many secondary and tertiary effects, such as less money in the economy, less consumer confidence, less investment, fewer businesses causing fewer jobs, and so on. A resilient economy has multiple growth areas; an unstable one has one or two. While you could certainly argue that we may already be in rough shape even without the bubble popping, it would undoubtedly get worse for the reasons I listed above,
      - gruez 1y ago
        >One of the major reasons there’s such a shortage of homes in the US is the extensive permit process required. Pivoting from data centers to home construction is not a straightforward process. Right, I'm not suggesting that all of the datacenter construction will seamlessly switch over to building homes, just that some of the labor/materials freed would be allocated to other sorts construction. That could be homes, amazon distribution centers, or grid connections for renewable power projects. >A resilient economy has multiple growth areas; an unstable one has one or two. >[...] it would undoubtedly get worse for the reasons I listed above, No disagreement there. My point is that if AI somehow evaporated, the hit to GDP would be less than $10 (total size of the sector in the toy example above), because the resources would be allocated to do something else, rather than sitting idle entirely. >Regarding the economics, the reason it’s a big deal that AI is powering growth numbers is because if the bubble pops, jobs go poof and stock prices with it as everyone tries to salvage their positions. While we still create jobs, on net we’ll be losing them. This has many secondary and tertiary effects, such as less money in the economy, less consumer confidence, less investment, fewer businesses causing fewer jobs, and so on. That's a fair point, although to be fair the federal government is pretty good at stimulus after the GFC and covid that any credit crunch would be short lived.
troyastorino 1y ago
I've seen this quote in a couple places and it's misleading. Using non-seasonally adjusted St. Louis FRED data (https://fred.stlouisfed.org/series/NA000349Q https://fred.stlouisfed.org/series/NA000349Q), and the AI CapEx spending for Meta, Alphabet, Microsoft, and Amazon from the WSJ article (https://www.wsj.com/tech/ai/silicon-valley-ai-infrastructure-capex-cffe0431 https://www.wsj.com/tech/ai/silicon-valley-ai-infrastructure...): ------------------------------------------------- Q4 2025 consumer spending: ~$5.2 trillion Q4 2025 AI CapEx spending: ~$75 billion ------------------------------------------------- Q1 2025 consumer spending: ~$5 trillion Q1 2025 AI CapEx spending: ~$75 billion ------------------------------------------------- Q2 2025 consumer spending: ~$5.2 trillion Q2 2025 AI CapEx spending: ~$100 billion ------------------------------------------------- So, non-seasonally adjusted consumer spending is flat. In that sense, yes, anything where spend increased contributed more to GDP growth than consumer spending. If you look at seasonally-adjusted rates, consumer spending has grown ~$400 billion, which might outstrips total AI CapEx in that time period, let alone growth. (To be fair the WSJ graph only shows the spending from Meta, Google, Microsoft, and Amazon. But it also says that Apple, Nvidia, and Tesla combined "only" spent $6.7 billion in Q2 2025 vs the $96 billion from the other four. So it's hard to believe that spend coming from elsewhere is contributing a ton.) If you click through the the tweet that is the source for the WSJ article where the original quote comes from (https://x.com/RenMacLLC/status/1950544075989377196 https://x.com/RenMacLLC/status/1950544075989377196) it's very unclear what it's showing...it only shows percentage change, and it doesn't even show anything about consumer spending. So, at best this quote is very misleadingly worded. It also seems possible that the original source was wrong.
raincole 1y ago
> growth Is the keyword here. US consumers have been spending so much so of course that sector doesn't have that much room to grow.
lisbbb 1y ago
That's bad because you just know at some point the bell is getting rung and then the bubble bursts. It was the same thing with office space in the late 1990s--they overbuilt like crazy predicting huge demand that never appeared and then the dot-com bubble burst and that was that.

lenerdenator 1y ago

And that's why there's a desire to make interest rates lower: cheap money is good for propping up bubbles. Now, it does that at the expense of the average person, but it will definitely prop up the bubble just long enough for the next election cycle to hit.

thrance 1y ago
Trump and his administration harassing the Fed and Powell over interest rates is like a swarm of locust salivating at ripened wheat fields. They want a quick feast at the expense of everything and everyone else, including themselves over the long term.
- dylan604 1y ago
  Trump knows that the next POTUS can just reverse his decisions much like he's done in both of his at bats. Only thing is there is no next at bat for Trump (without major changes that would be quite devastating), so he's got to get them in now. The sooner the better to take as much advantage of being in control.
- pessimizer 1y ago
  The left is almost completely unanimous in their support for lowering interest rates, and have been screaming about it for years, since the first moment they started being raised again. And for the same reasons that Trump wants it, except without the negative connotations for some reason. Recently, I've heard many left wingers, as a response to Trump's tariffs, start 1) railing about taxes being too high, and that tariffs are taxes so they're bad, and 2) saying that the US trade deficit is actually wonderful because it gives us all this free money for nothing. I know all of these are opposite positions to every one of the central views of the left of 30 years ago, but politics is a video game now. Lefties are going out of their way to repeat the old progressive refrain: > "The way that Trump is doing it is all wrong, is a sign of mental instability, is cunning psychopathic genius and will resurrect Russia's Third Reich, but in a twisted way he has blundered into something resembling a point..." "...the Fed shouldn't be independent and they should lower interest rates now."

throwmeaway222 1y ago

- Microsoft’s AI-fueled $4 trillion valuation As someone in an AI company right now - Almost every company we work with is using Azure wrapped OpenAI. We're not sure why, but that is the case.

hnuser123456 1y ago
Nobody gets fired for choosing Microsoft
ElevenLathe 1y ago
MS salespeople presumably already have weekly or monthly meetings with all the people with check-cutting authority, and OpenAI doesn't. They're already an approved vendor, and what's more the Azure bill is already really really big, so a few more AI charges barely register. It's the same reason you would use RDS at an AWS shop, even if you really like CloudSQL better. This is the main reason the big cloud vendors are so well-positioned to suck up basically any surplus from any industry even vaguely shaped like a b2b SaaS.
guidedlight 1y ago
It’s because most companies already have a lot of confidence with Microsoft contracts, and are generally very comfortable storing and processing highly sensitive data on Microsoft’s SaaS platforms. It’s a significant advantage. Also Microsoft Azure hosts its own OpenAI models. It isn’t a proxy for OpenAI.
chung8123 1y ago
All of their files are likely on a Microsoft store already too.
edaemon 1y ago
Lots of AI things are features masquerading as products. Microsoft already has the products, so they just have to add the AI features. Customers can either start using a new and incomplete product just for one new feature, or they can stick with the mature Microsoft suite of products they're already using and get that same feature.
1y ago

micromacrofoot 1y ago

This is going to be an absolute disaster, the government is afraid of regulating AI because it's so embedded in our economy now too

jcgrillo 1y ago
I think we're already starting to see the cracks with OpenAI drastically tightening their belt across various cloud services. Depends how long it takes to set in, but seems like it could be starting this quarter.

jackcosgrove 1y ago

I'm not sure the comparison is apples to apples, but this article claims the current AI investment boom pales compared to the railroad investment boom in the 19th century. https://wccftech.com/ai-capex-might-equal-2-percent-of-us-gdp-in-2025-while-remaining-far-below-the-peak-spending-on-rail-roads-in-the-19th-century/ https://wccftech.com/ai-capex-might-equal-2-percent-of-us-gd... > Next, Kedrosky bestows a 2x multiplier to this imputed AI CapEx level, which equates to a $624 billion positive impact on the US GDP. Based on an estimated US GDP figure of $30 trillion, AI CapEx is expected to amount to 2.08 percent of the US GDP! Do note that peak spending on rail roads eventually amounted to ~20 percent of the US GDP in the 19th century. This means that the ongoing AI CapEx boom has lots of legroom to run before it reaches parity with the rail road boom of that bygone era.

decimalenough 1y ago
There is obvious utility to railroads, especially in a world with no cars. The net utility of AI is far more debatable.
- gruez 1y ago
  >The net utility of AI is far more debatable. I'm sure if you asked the luddites the utility of mechanized textile production you'd get a negative response as well.
  - shadowgovt 1y ago
    With this generation of AI, it's too early to tell whether it's the next railroad, the next textile machine, or the next way to lock your exclusive ownership of an ugly JPG of a multicolored ape into a globally-referenceable, immutable datastore backed by a blockchain.
  - decimalenough 1y ago
    Railroads move people and cargo quickly and cheaply from point A to point B. Mechanized textile production made clothing, a huge sink of time and resources before the industrial age, affordable to everybody. What does AI get the consumer? Worse spam, more realistic scams, hallucinated search results, easy cheating on homework? AI-assisted coding doesn't benefit them, and the jury is still out on that too (see recent study showing it's a net negative for efficiency).

asdev 1y ago

look at the S&P 500 chart when ChatGPT came out. We were just on our way to flushing out the Covid excess money and then the AI narrative saved the market. AI narrative + inflation that is definitely way more than reported is propping up this market.

hdgvhicv 1y ago
It amazes me when people say figures are wrong, but fail to provide alternative figures which widely differ from published ones. Often it comes down to arguing the “basket of goods” is wrong rather than the individual components, or perhaps that there are wider rates in specific areas.

rglover 1y ago

> There could be a crash that exceeds the dot com bust, at a time when the political situation through which such a crash would be navigated would be nightmarish. If the general theme of this article is right (that it's a bubble soon to burst), I'm less concerned about the political environment and more concerned about the insane levels of debt. If AI is indeed the thing propping up the economy, when that busts, unless there are some seriously unpopular moves made (Volcker level interest rates, another bailout leading to higher taxes, etc), then we're heading towards another depression. Likely one that makes the first look like a sideshow. The only thing preventing that from coming true IMO is dollar hegemony (and keeping the world convinced that the world's super power having $37T of debt and growing is totally normal if you'd just accept MMT).

Hikikomori 1y ago
Ai bubble, economy in the trash already, inflation from tariffs. Dollar might get real cheap when big holders start selling stocks and exchanging it, nobody wants to be left holding their bag, and they have a lot of dollars. Which is their (Thiel, project2025, etc) plan, federal land will be sold for cheap.
- decimalenough 1y ago
  Selling stocks for what? If the dollar is going down the toilet, the last thing you want to have is piles of rapidly evaporating cash.
  - marcusestes 1y ago
    Never totally discount _deflationary_ scenarios.
    - heathrow83829 1y ago
      based on my understanding of what all the financial pros are saying: they'll never let that happen. they'll inflate away to the moon before they allow for a deflationary bust. that's why everyone's in equities in the first place. it's almost insured, at this point.

Animats 1y ago

"Over the last six months, capital expenditures on AI—counting just information processing equipment and software, by the way—added more to the growth of the US economy than all consumer spending combined." If this isn't the Singularity, there's going to be a big crash. What we have now is semi-useful, but too limited. It has to get a lot better to justify multiple companies with US $4 trillion valuations. Total US consumer spending is about $16 trillion / yr. Remember the Metaverse/VR/AR boom? Facebook/Meta did somehow lose upwards of US$20 billion on that. That was tiny compared to the AI boom.

rockemsockem 1y ago
Tbf I think most would say that the VR/AR boom is still ongoing, just with less glitz. Edit: agree on the metaverse as implemented/demoed not being much, but that's literally one application
- Macha 1y ago
  Honestly, VR/AR is a small gaming peripheral business, like joysticks and third party controllers. And their are companies that make that their thing and make money from it, but it was never going to be profitable enough to be the thing that a company the size of Facebook pivots to, which I could see being a consumer in the space before Facebook got in and after too. Don't get me wrong, VRChat and Beat Saber are neat, and all the money thrown at the space got the tech advanced at a much faster rate than it would have organically have done I'm the same time (or potentially ever). But you can see Horizon's attempt to be "VRChat but a larger more profitable business" to see how the things you would need to do to monetise it to that level will lose you the audience that you want to monetise.
keeda 1y ago
I posted a comment yesterday regarding this with links to a couple relevant studies: https://news.ycombinator.com/item?id=44793392 https://news.ycombinator.com/item?id=44793392 -- briefly: * Even with all this infra buildout all the hyperscalers are constantly capacity constrained, especially for GPUs. * Surveys are showing that most people are only using AI for a fraction of the time at work, and still reporting significant productivity benefits, even with current models. The AGI/ASI hype is a distraction, potentially only relevant to the frontier model labs. Even if all model development froze today, there is tremendous untapped demand to be met. The Metaverse/VR/AR boom was never a boom, with only 2 big companies (Meta, Apple) plowing any "real" money into it. Similarly with crypto, another thing that AI is unjustifiably compared to. I think because people were trying to make it happen. With the AI boom, however, the largest companies, major governments and VCs are all investing feverishly because it is already happening and they want in on it.

kogasa240p 1y ago

Surprised the SVB collapse wasn't mentioned, the LLM boom gained a huge amount of steam right after that happened.

deleted 1y ago

[deleted]

johng 1y ago

There has to be give and take to this as well. The AI increase is going to cost jobs. I see it in my work flow and our company. We used to pay artists to do artwork and editors to post content. Now we use AI to generate the artwork and AI to write the content. It's verified by a human, but it's still done by AI and saves a ton of time and money. These are jobs that normally would have gone to a human and now go to AI. We haven't paid a cent for AI mind you -- it's all on the ChatGPT free tier or using this tool for the graphics: https://labs.google/fx/tools/image-fx https://labs.google/fx/tools/image-fx I could be wrong, but I think we are at the start of a major bloodbath as far as employment goes.... in tech mostly but also in anything that can be replaced by AI? I'm worried. Does this mean there will be a boom in needing people for tradeskills and stuff? I honestly don't know what to think about the prospects moving forward.

gamblor956 1y ago

This is backwards. The AI bubble is so big that it's draining useful investment from the rest of the economy. Hundreds of thousands of people are getting fired so billionaires can try to add a few more zeros to their bank account. The best investment we can make would be to send the billionaires and AI researchers to an island somewhere and not let them leave until they develop an AI that's actually useful. In the meanwhile, the rest of us get to live productive lives.

agent_turtle 1y ago
There’s no evidence of AI causing layoffs. There’s lots of evidence of CEOs using AI as a scapegoat to entice investors: https://apnews.com/article/ai-layoffs-tech-industry-jobs-ece82b0babb84bf11497dca2dae952b5# https://apnews.com/article/ai-layoffs-tech-industry-jobs-ece...
- add-sub-mul-div 1y ago
  Discounting the evidence of it being explicitly cited as a reason for layoffs and that its purpose to business is to replace human labor, there's no evidence that its replacing human labor. Got it.
  - rockemsockem 1y ago
    Citing AI for layoffs is great cover for "we over hired during Covid". There probably are a few nuts out there that actually fired people to be replaced with AI, I feel like that won't go well for them There really is no evidence.
    - no_wizard 1y ago
      There's strong sentiment bubbling that supports AI driven layoffs are going to happen or are happening[0]. I'll say its okay to be reserved on this, since we won't know until after the fact, but give it 6-12 months, then we'll know for sure. Until then, I see no reason not to believe there is a culture in the boardrooms forming around AI that is driving closed door conversations about reducing headcount specifically to be replaced by AI. [0]: https://gizmodo.com/the-end-of-work-as-we-know-it-2000635294 https://gizmodo.com/the-end-of-work-as-we-know-it-2000635294

BigglesB 1y ago

I also wonder the extent to which "pseudo-black-box-AI" is potentially driving some of these crazy valuations now due to it actually being used in a lot algorithmic trading itself... seems like a prevalence of over-corrected models, all expecting "line go up" from recent historical data would be the perfect way to cook up a really "big beautiful bubble" so to speak...

xg15 1y ago

So what will happen to all those massive data centers when the bubble bursts? Back to crypto?

GianFabien 1y ago
After the dot bomb of 2000, the market got flooded with CISCO and Sun gear for pennies on the dollar. Lots of post 2000 startups got their gear from those auctions and were able to massively extend their runway. Same could happen again.
- dboreham 1y ago
  Aeron chairs too.

GianFabien 1y ago

There's only two reasons to buy stocks: 1) for future cashflows (aka dividends) derived from net profits. 2) to on-sell to somebody willing to pay even more. When option (2) is no longer feasible, the bubble pops and (1) resets the prices to some multiple of dividends. Economics 101.

Nition 1y ago
Just like land :)
heathrow83829 1y ago
yes, but there will always be a #2 with QE being normalized now.
dehrmann 1y ago
> ...resets the prices to some multiple of dividends But wouldn't you want to pay more for a company that has a history of revenue and income growth than one in a declining industry? And you have to look at assets on the company's books; you're not just buying a company, you're buying a share of what it owns. What if it has no income, but you think there's a 10% chance it'll be printing money in 5 years? That's why prices won't naively reset to a multiple of ~~dividends~~ income (see the dividend irrelevance theory) across the board. Someone will always put a company's income in context.

HocusLocus 1y ago

If AI gets us into orbit ( https://news.ycombinator.com/item?id=44800051#44804687 https://news.ycombinator.com/item?id=44800051#44804687 ) or revitalizes nuclear, I'm fine with those things. It's true that AI usage can scale with availability better than most things but that's not a path to world domination.

BriggyDwiggs42 1y ago
Is the linked post referring to literal orbit? Hell will freeze over before orbital datacenters make sense (assuming no antigrav etc gets invented tomorrow).

m0llusk 1y ago

Interesting piece, but the idea that this guy understands how oligarchs think seems way off. Jack Welch took General Electric from a global leader to a sad bag holder and he and his fans cheered progress with every positive quarterly report.

throw0101d 1y ago

From a few weeks ago, see "Honey, AI Capex is Eating the Economy" / "AI capex is so big that it's affecting economic statistics" (365 points by throw0101c 18 days ago | hide | past | favorite | 355 comments): * https://paulkedrosky.com/honey-ai-capex-ate-the-economy/ https://paulkedrosky.com/honey-ai-capex-ate-the-economy/ * https://news.ycombinator.com/item?id=44609130 https://news.ycombinator.com/item?id=44609130

diogenescynic 1y ago

They've been saying the same thing about whatever the trend of the moment is for years. Before this it was Magnificent 7 and before that it was FANG, and before that it was something else. Isn't this just sort of fundamental to how the economy works?

morpheos137 1y ago

Imagine, the world's biggest economy propped up by hopes and dreams. Has anyone successfully monetized "AI" at a scale that generates a reasonable return on investment?

jus3sixty 1y ago

The article's comparison to the 19th century railroad boom is pretty spot on for how big it all feels, but maybe not so much for what actually happened. Back then, the money poured into building real stuff like actual railroads and factories and making tangible products. That kind of investment really grew the value of companies and was more about creating actual economic value than just making shareholders rich super fast.

johncole 1y ago
While some of the investment in railroads (and canals before it, and shipping before that) was going into physical assets of economic value, there were widespread instances of speculation, land "rights" fraud, and straight up fraud without any economic value added.
dehrmann 1y ago
> Back then, the money poured into building real stuff Its limitations are well-documented, but cutting-edge AI right now is very much "real stuff."
satyrun 1y ago
You have no idea what you are talking about. The amount speculation and fraud from this time period would make even the biggest shit coin fraud blush. Try a biography of Jay Gould if you want more information.

poopiokaka 1y ago

You lost me at 404 wanna be event. 13 viewers looking ass

akomtu 1y ago

More like the corpos are really excited about the post-human AI future, so they are pouring truckloads of money on it and this raises the GDP number. The well-being of the average folk is in decline.

BriggyDwiggs42 1y ago
I think the corpos are excited for a new source of meaningful revenue growth.

tharmas 1y ago

Here's a comprehensive explanation of the coming employment apocalypse as a result of AI: Post-Labor Economics Lecture 01 - "Better, Faster, Cheaper, Safer" (2025 update) https://www.youtube.com/watch?v=UzJ_HZ9qw14 https://www.youtube.com/watch?v=UzJ_HZ9qw14

neuroelectron 1y ago

As designed

IAmGraydon 1y ago

Seems like the title should be “AI hype is propping up US company valuations.”

nowittyusername 1y ago

Correction ... Nvidia is propping up the economy. its like 24% of the tech sector and is the only source of gpus for most companies. This is really , really bad. Talk about all eggs in one basket. If that company was to take a shit, the domino effect would cripple the whole sector and have unimaginable ramifications to the US economy.

knowitnone2 1y ago

yes and no. AI may be propping up some tech companies who make items in the AI space but the number of jobs lost due to AI is pretty overwhelming. I spent the last week using LLMs to build an app using libraries I am unfamiliar with. It was amazing - to the point where I won't have to write a line of code anymore. These developers probably have some money saved up but that'll dry up. Plus the new grads are now competing against people with some experience. Tariffs + inflation + a presidential grifter = bad times.

jaimex2 1y ago
It's all fun and games till the LLM can't fix the issue it created. It can regurgitate and mash up all the blog tutorials that exist online but eventually it'll come across a new problem and it'll be sweet out of luck. Vibe coding is great for Shanty town software and the aftermath from storms is equally entertaining to watch.
- imiric 1y ago
  It is terrifying whenever a vibe coder publishes an app or service that gains users. It's celebrated and seen as an example of what AI tools can accomplish. Until the inevitable security "breach" happens a few weeks later because they left the front door open. The scary thing is that these tools are now part of the toolset of experienced developers as well. So those same issues can and will happen to apps and services that used to take security seriously. It's depressing witnessing the average level of quality in the software industry go down. This is the same scenario that caused mass consumer dissatisfaction in 1983 and 2000, yet here we are again.

jaredcwhite 1y ago

I'm genuinely scared of what the crash will do to society. As much as I loathe AI boosterism, I'm starting to think my personal desire for schadenfreude may not outweigh the fear that I and everyone else I care about will get swept under the tsunami of the bubble burst.

rapsey 1y ago
If you are worried about a stock market crash, the current AI boom is absolutely nothing compared to the dotcom boom. Also because so many companies are staying private, a crash in private markets is relatively irrelevant for the overall economy.
- bad_username 1y ago
  The Buffett indicator is larger than in 2000. Schiller PE ratio is getting close.
  - rapsey 1y ago
    What these things fail to take into account is the growth in the amount of money going into the stock market. Simplifying an economic activity down to a single short formula leaves out a lot of important parameters and these kinds of things tend to hold some truth for the time they are invented and often break at some point in the near future after they are created. This is because of changes in money flows in the economy as a result of tax, regulation and technology changes. Like the yield curve inversions and the Sahm rule and so on.

antman 1y ago

Althought we know that there is no empirical evidence for trickle down economy, a worst case scenario was that some of the profit would be allocated to be cost of labor and through great economy expansion and regardless of rising inequality and some reskilling, innovation and its effect on the rise of the economy was at least somewhat positive for everybody. This will not be the case anymore. There is no labor restructuring to be made, the lists for the future safe jobs are humorous to say the least. There has been a difficulty in finding skilled labor in sustainable wages for the companies and that has been highlighted as a key blocker for growth. Econony will rise by removing this blocker by AI. Rise of the economy due to AI invalidates old models and trickle down spurious correlations. Rise of the economy through AI directly enables the most extreme inequality and no reflexes or economics experience exists to manage it. There have been many theories for revolutions, social financial ideological and others. I will not comnent on those but I will make a practical observation: It boils down to the ratio of controlers vs controlled. AI also enables an extremely minimal number of controllers through the AI managment of the flow information and later a large number of drones can keep everyone at bay. Cheaply, so good for the economy.

ryao 1y ago
> there is no empirical evidence for trickle down economy I usually avoid responding to remarks like this because they risk forays into politics, which I avoid, but the temptation to ask was too great here. What do you consider computers, cellphones, air conditioners, flat screen TVs and refrigerators to be? The first ones had outrageous prices that only the exorbitantly wealthy could afford. Now almost everyone in the US has them. They seem to have trickled down to me.
- neom 1y ago
  OP is talking about this: https://www.investopedia.com/terms/t/trickledowntheory.asp https://www.investopedia.com/terms/t/trickledowntheory.asp You're talking about this: https://ideas.repec.org/p/wrk/warwec/270.html https://ideas.repec.org/p/wrk/warwec/270.html :)
  - 1y ago

PicassoCTs 1y ago

So if the whole of the old economic elite goes fully catatonic, hiding in server farms from the desert of the real whispering "singularity" while rocking back and forth- will there spring up a new economic elite that is willing to deal with realities as they are?

digitcatphd 1y ago

I have started to notice this as well over the past several months, in-fact, I would say it is orders of magnitude larger than the Crypto bubble and when it bursts will be significantly more impactful. Right now, everything is propped up on the premise the hyperscalers will grow EPS proportionately to their investment and that ROA is being priced in as a best case scenario (hope) in their share price. Maybe its not ROA at all, maybe its simply FOMO, we keep citing this 'AI Race' as if there is some end objective to 'win' drawing parallels to the nuclear arms race that only resulted in massive wasted CAPEX in decaying nukes sitting in unused bunkers since the cold war. (Not to mention it isn't even clear this arms race played a direct factor in the war beside depleting resources) Everyone is happy right now. Execs get stock bonuses, investors get returns, vendors get contracts. Once this is questioned, and history demonstrates it undoubtedly will be, it will cause a cascading collapse. History is a mathematical truth.

ubercore 1y ago
The usable amount of AI, no matter how optimistic you are about current progression, has to be below the projections the entire AI economy is living on right now.
- Matthyze 1y ago
  A considerable group of people think AGI or even ASI is right around the corner
  - caleb-allen 1y ago
    Sure, just as a considerable group of alchemists believed the recipe for gold was right around the corner
    - jayGlow 1y ago
      technically we can turn lead into gold now though it's not economical or scalable. so the alchemist were proven right in the end.

highfrequency 1y ago

> These are not railroads—we aren’t building century-long infrastructure. AI datacenters are short-lived, asset-intensive facilities riding declining-cost technology curves, requiring frequent hardware replacement to preserve margins. Neglects the most important benefit of large semiconductor spending: we are riding the Learning Curve up Moore's Law. We are not much better at building railroads today than we were in 1950. We are way better at building computers today. The GPUs may depreciate but the knowledge of how to build, connect, and use them does not - that knowledge compounds over time. Where else do you see decades of exponential efficiency improvements?

missingdays 1y ago
"We are not much better at building railroads today than we were in 1950." - in the US - maybe. In other countries - I doubt that's the case

DebtDeflation 1y ago

AI isn't propping up the economy. The BELIEF that AI will replace almost all labor (employees) is what's propping up the economy. Or rather, propping up the stock market. I'm not sure what kind of economy we're going to have when 99% of the income flows to 0.001% of the population.

ckocagil 1y ago
One only needs to look at the massive island complexes with underground bunkers the billionaires are building for themselves.

georgeplusplus 1y ago

It seems AI or AGI has become the divider between technology that is needed, vs a nice to have. I can’t think of one reason anyone really wants this right now. I prefer to deal with a human in 99% of my interactions.

mrbluecoat 1y ago

9 of today's top 30 homepage articles are about AI so I'd say it's also propping up HN.

zingababba 1y ago

AI and GLP-1 Receptor Agonists.

sriram_malhar 1y ago

The latest ponzi.

Madmallard 1y ago

What even is this? Are we just lying on the front of hacker news now? Anyone who is actually in the industry knows that this is the opposite of the truth. There are more layoffs than ever. Yea maybe it's being propped up for the richest of the rich taking advantage of leverage over speculation. Everyone else? It's just getting worse and worse. And that's what actually matters.

mikewarot 1y ago

I'm wondering what kind of technological change would be large enough to force the popping of this bubble, as opposed to the likely economic or other triggers? Would another order of magnitude decrease in the amount of compute for a model do it? Would the cost of compute falling by an order of magnitude in a black swan event? Or, perhaps Jevan's paradox[1] kicks in, and we just eat up the extra capacity in new uses. [1] https://en.wikipedia.org/wiki/Jevons_paradox https://en.wikipedia.org/wiki/Jevons_paradox