​​Video: AI: Boom or Bubble?​​​

I think it’s definitely happening now. The numbers are so big that even if some of it disappears or slips, it’s still a tremendous tailwind. Director of Market Strategy Brad Neuman discusses the ​AI industrial buildout being driven by current ​​business spending.

What Is the “American Business Spending Boom” Paper About?

BRAD NEUMAN: It’s about a huge boom in business spending. A lot of times, people think of the economy as consumer driven, but I think now business spending is growing significantly faster than the overall economy, so it’s taking share. And there’s reasons to believe, based on innovation and different forms of economic policy, that it’s going to continue well into the future. The NVIDIA CEO talks about AI factories. And so putting up these giant data centers that needs to be supported by gigawatts of power that can power millions of homes. These are huge investments. In fact, the overall investment in AI in America over the next several years, through 2030, could be something like $6 trillion. And just to put that in perspective, that’s about as much as we spent in WWII, mobilizing and fighting in the war in today’s dollars, so a very significant investment.​

Why Is Compute Such a Key Driver of This?

BRAD: These factories are essentially manufacturing thought. And ”token” is going to be a very important term and metric. It signifies a word or a part of a word, and when I ask a large language model. “what is the capital of France?,” and it tells me Paris, that’s like ten tokens. But then if I ask a large language model, “can you plan a trip to France, and I’ve got three kids and a wife, and this is my budget, come up with something,” then it needs to do some reasoning and needs to make several passes at it, and then it could use a hundred or maybe even a thousand times the amount of compute as a simple Google search.

How Much of This Is Happening Now?

BRAD: Well, the groundwork has certainly been laid, and tech spending is growing very quickly. But there’s a long lead time. We’re talking about tons and tons of earth that need to be moved, and rocks that need to be crushed, and buildings that need to be erected, and energy that needs to be put in place. This is like on a massive scale, which is why I compare it to WWII. So, while the underpinnings are there, the construction of all of these factories and the equipment put in place is really going to come over the next several years. 

How Does This Thesis Reconcile “Boom vs. Bubble”?

BRAD: I think the most important thing of boom versus bubble is that, I think, that this is being driven by a real need for investment, whereas the tech bubble or the internet build-out was obviously fantastic general-purpose technology that people had a lot of hope for. But there was, as they were building it, there was a lot of spare capacity. So, there was a lot of dark fiber and routers, and equipment being put in the ground that we hoped that people would use because of the great applications that would come on the internet.

Today, if you listen to CEOs talk, they are compute-constrained and power-constrained. They need more power on the grid, they need more manufacturing capability, they need more AI factories, more GPU processors. So there needs to be capacity expansions and that’s what this business spending is about.

Where Do You Think We Are in the Timeline?

BRAD: I think it’s definitely happening now. We’re seeing the plans put in place now. The $9 trillion that I’m quoting here comes from the White House. Will all of that get built over the next couple of years? No. Some may slip. It may not happen in a timely manner. Some may not happen at all. So the overall U.S. economy is a little over $30 trillion, obviously consumer spending is most of it. But this business spending is a little over $4 trillion. And when you think of the $9 trillion of commitments, if even a portion of that, happens and is additive to that $4 trillion, it’s a tremendous boost to growth. So, I do think it’s happening, but the numbers are so big that even if some of it disappears or slips, it’s still a tremendous tailwind.


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