Goldman Sachs: AI Spending Impact on GDP Overstated

Goldman Sachs has expressed skepticism regarding the perceived impact of artificial intelligence (AI) capital expenditure on U.S. GDP growth. In a report released on Tuesday, economist Jessica Rindels stated that while AI spending is significant, its contribution to GDP is likely exaggerated. Rindels noted, "While media reports and market commentary often claim that AI is making a very large contribution to US GDP growth but also crowding out a great deal of other activity, our analysis suggests that both claims are exaggerated."

Key Details

The firm anticipates that AI investments will only add a modest amount to measured GDP growth, as many companies are purchasing imported AI equipment. Rindels estimated that indirect effects of AI spending could reduce the impact on GDP growth by about 0.1 percentage points in 2026. This includes roughly $50 billion in crowding-out effects from various channels, alongside increased costs for electricity and other essentials.

In contrast, economist David Rosenberg highlighted that approximately 50% of corporate investment is currently directed towards AI-related items, which are growing at an annual rate of 18% in real terms. He warned that this focus on AI is detracting from traditional capital spending, stating, "When you strip out the AI spend, the economy is actually very weak." Rosenberg suggested that without the AI boom, the U.S. economy might have already slipped into recession.

Background

The U.S. economy grew at an annualized rate of 1.5% in the second quarter, down from 2.1% in the first quarter, and unexpectedly lost 23,000 jobs in July, contrary to expectations for job gains. Rosenberg indicated that early warning signs, such as rising financing costs, could signal a downturn in the AI investment trend.

Related coverage: Hyperscaler AI Spending Expected to Hit $1.2 Trillion, Eurozone, US Economies Show Growth Amid AI Investment Surge.

Based on reporting by: businessinsider.com