How much of our economic growth depends on AI?

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**Kimberly Adams** (1:31)
Just how much of our economic growth is dependent on AI?
From Marketplace in New York, I'm Kimberly Adams. We're going to get our first look at GDP for the second quarter later this month. And if it's anything like the first quarter, the data will show us that the economy is being increasingly fueled by investment in AI. All the spending that goes into building data centers, along with all the other technology that powers artificial intelligence. Marketplace's Justin Ho reports.

**Justin Ho** (2:00)
It's been a while since we've seen this much spending by the tech sector.

**Charlie Doherty** (2:03)
We haven't really seen it since the 1990s, when we saw the growth of the Internet.

**Justin Ho** (2:09)
Charlie Doherty is a senior economist with Wells Fargo. Business investment in general makes up about a fifth of overall GDP. So Doherty says it's encouraging that AI investment is so strong, considering what's going on with the rest of the economy.

**Charlie Doherty** (2:22)
You know, what we've seen is a housing market that's really been struggling. We still have relatively high interest rates. Consumer spending looks like it's moderating.

**Justin Ho** (2:32)
But there are limits to how much AI-related spending can support the broader economy. For instance, data centers rely heavily on imported electronics, says Josh Lainer with SGH Macro Advisors.

**Josh Lainer** (2:43)
So we're talking about, you know, trying to reshore US manufacturing activity. This spending, you know, is not really translating into a lot of domestic jobs on the manufacturing side.

**Justin Ho** (2:53)
Lainer says AI investment is creating jobs in construction, but that's just a short-term boost, says Bernard Yaros with Oxford Economics.

**Bernard Yaros** (3:01)
You know, once you stand up a data center, it doesn't really take that many people to man it or to maintain it.

**Justin Ho** (3:08)
This wave of investment also might not last, says Kathy Bostjancic, Chief Economist at Nationwide.

**Kathy Bostjancic** (3:14)
At some point, it will peak probably in the next, could even be in 2027 or so, 2028 It doesn't mean it's going to drop sharply, but it could peak and start to taper off a little bit.

**Justin Ho** (3:26)
Bostjancic says that wouldn't necessarily be a bad thing for the overall economy, because the investment in AI infrastructure isn't where the real payoff is.

**Kathy Bostjancic** (3:34)
The big payoff is once it gets disseminated through businesses, they utilize that and reorganize themselves around this new technology.

**Justin Ho** (3:45)
Bostjancic says there have been plenty of waves of investment that have caused the economy to expand, railroads, electrification, the IT boom in the 90s. So if companies start using AI to expand production?

**Kathy Bostjancic** (3:56)
That would propel productivity gains and that would feed into overall economic growth.

**Justin Ho** (4:02)
But getting there could take years. Ann Villamil, a professor at the University of Iowa, says in the meantime, companies and investors might not be satisfied with the returns on those investments. Markets could sell off, causing household wealth to fall.

**Ann Villamil** (4:15)
That would lead to consumer spending softening through a wealth effect, and it would make it much more difficult to finance other types of investment in the economy.

**Justin Ho** (4:26)
And that would cause the broader economy to slow down. I'm Justin Howe for Marketplace.