Last year my trend was “The Coming Realignment.” History tends to propagate at a certain rhythm and then converge and cascade around certain points. Years like 1776, 1789, 1848, 1920, 1948, 1968, 1989—and, it seems, 2020—mark these inflection points. The years that follow are usually spent absorbing the shock and navigating the consequences.
Today, everything is up for question. Will AI boom or bust? Will it take our jobs or bring new prosperity? What kind of economic system will we adopt for the future? We are in the midst of a great realignment. What we know from previous inflections is that what comes after will be profoundly different from before. What we most need to watch is our institutions.
AI boom or bust?
Today, the AI investment boom is without a doubt the single biggest factor propping up the US economy. Just this year, tech giants are expected to invest roughly $364 billion in the technology. And the spending won’t stop there. McKinsey projects that building AI data centers could add up to $5.2 trillion in investment by 2030.
This boom is different from what we’ve seen in the past because the main investors aren’t speculators or startups, but some of the world’s most profitable companies, including Alphabet, Meta, and Microsoft. Unlike in past cycles, if the industry hits a downturn, there will still be tens of billions of dollars in annual profits to cushion the blow.
Still, as investor Paul Kedrosky points out, there are reasons to worry. Investment in data center infrastructure has already surpassed the peak of the dot-com boom and is beginning to approach levels last seen during the railroad frenzy of the 19th century. Also, 60% of the cost of those data centers goes to AI chips, which have a useful life of only about three years.
