AI investment is the only thing keeping the US out of recession
- Reference: 1761311986
- News link: https://www.theregister.co.uk/2025/10/24/ai_investment_us_recession/
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This is offsetting the drag from higher interest rates and the impact of the Trump administration's chaotic trade policies, numerous sources say.
Big money is nervous about AI hype, but not ready to call it a bubble [1]READ MORE
"AI has kept the economy out of a recession," BNP Paribas chief US economist James Egelhof [2]told Yahoo Finance this week, noting the spending boom has convinced businesses that robust growth and a productivity surge are imminent.
Apollo Global Management chief economist Torsten Sløk wrote yesterday: " [3]There is basically no growth in corporate capex outside of AI at the moment ."
Unlike typical investment patterns, AI spending hasn't fallen despite Federal Reserve rate hikes because, Sløk noted, datacenter investment is ultimately financed by rising equity valuations of the "Magnificent Seven" including Microsoft, Amazon, Alphabet, and Nvidia.
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Analyst firm Omdia estimates that [5]global datacenter capex will top $657 billion in 2025, almost double the figure of just two years ago, with the US dominating. Amazon's annual datacenter spending alone exceeds $100 billion, roughly Costa Rica's entire GDP.
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Jason Furman, Economist and former Deputy Director of the US National Economic Council, [8]estimated in a New York Times podcast that 92 percent of the economic demand in the first two quarters of this year came from information processing equipment and software.
"Ultimately, what we're really hoping for is that AI shows up on the supply side of the economy, actually helping us do more with less," he said. Some of that is happening, he claimed, "but there hasn't been anything particularly special about productivity growth to date."
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This is echoed in numerous studies showing that despite the billions being poured into AI, the return on investment remains uncertain.
[10]AI bubble inflates Microsoft CEO pay to $96.5M
[11]Microsoft, Nvidia, and others inject $40B into AI bubble with massive datacenter deal
[12]Oracle will have to borrow at least $25B a year to fund AI fantasy, says analyst
[13]Investors throw another $13B on the Anthropic cash bonfire
A UK government [14]trial of Microsoft's M365 Copilot found no discernible gain in productivity, speeding up some tasks yet making others slower. US research revealed that companies invested $35-40 billion in generative AI initiatives, yet [15]95 percent have seen zero returns .
The air is hissing out of the overinflated AI balloon [16]READ MORE
Questions about unsustainability are intensifying. Management consultants at Bain & Company estimate that current spending trajectories would require the tech sector to generate [17]$2 trillion in annual AI sales by 2030 – fueling concerns about another tech bubble.
The Bank of England's Financial Policy Committee [18]warned this month about the growing danger of a sudden correction in the financial markets due to inflated tech and AI stock valuations. Financial analysts have [19]expressed particular concern over OpenAI's $500 billion valuation despite the AI darling not turning a profit yet.
OpenAI chief Sam Altman himself acknowledged the [20]AI industry is in a bubble , but seemed relaxed about potential consequences, even though a recent report claimed the company is [21]losing about three times more money than it's earning – with just 5 percent of ChatGPT's 800 million users actually paying for it. ®
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[1] https://www.theregister.com/2025/10/03/ai_bubble_watch_markets/
[2] https://finance.yahoo.com/news/ai-is-keeping-the-us-economy-out-of-a-recession-100012367.html
[3] https://www.apolloacademy.com/ai-boom-debt-vs-equity/
[4] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/aiml&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=2&c=2aPuilFcnEyASahARUBGnKQAAAQ0&t=ct%3Dns%26unitnum%3D2%26raptor%3Dcondor%26pos%3Dtop%26test%3D0
[5] https://www.theregister.com/2025/08/14/datacenter_investment/
[6] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/aiml&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44aPuilFcnEyASahARUBGnKQAAAQ0&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[7] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/aiml&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33aPuilFcnEyASahARUBGnKQAAAQ0&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[8] https://www.nytimes.com/2025/10/23/opinion/ai-bubble-economy-bust.html
[9] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/aiml&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44aPuilFcnEyASahARUBGnKQAAAQ0&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[10] https://www.theregister.com/2025/10/22/microsoft_nadella_pay/
[11] https://www.theregister.com/2025/10/15/microsoft_nvidia_ai_datacenter_deal/
[12] https://www.theregister.com/2025/09/29/oracle_ai_debt/
[13] https://www.theregister.com/2025/09/03/anthropic_funding/
[14] https://www.theregister.com/2025/09/04/m365_copilot_uk_government/
[15] https://www.theregister.com/2025/08/18/generative_ai_zero_return_95_percent/
[16] https://www.theregister.com/2025/08/25/overinflated_ai_balloon/
[17] https://www.theregister.com/2025/09/24/bain_ai_costs/
[18] https://www.theregister.com/2025/10/08/boe_dotcom_bubble_ai/
[19] https://www.theregister.com/2025/10/03/ai_bubble_watch_markets/
[20] https://www.theregister.com/2025/08/15/boy_riding_bubble_realizes_what/
[21] https://www.theregister.com/2025/10/15/openais_chatgpt_popular_few_pay/
[22] https://whitepapers.theregister.com/
Re: When the bubble pops...
The US has been buying all old needles to prevent anybody from popping the bubble. New needles are no longer allowed to enter the country to prevent bubble popping imports (they were produced in China anyway). It will probably be necessary to outlaw all sharp objects Real Soon Now™ to prevent inadvertent popping disasters and collecting points are already being established.
Re: When the bubble pops...
It's so frustrating, because we could be achieving this same thing (i.e. the economy not imploding) by pumping money into other things, actually useful things. Imagine what the economy would do if businesses started pumping money into local businesses and infrastructure improvements and healthcare?
But I know that's a radical, communist take these days.
Irrational exuberance
Irrational exuberance strikes again.
The sooner it all collapses, the less long term damage, but of course you can't expect the scammers promoting this crap from acting rationally. Cuz grifters gonna grift.
Re: Irrational exuberance
In fairness the scammers are acting very rationally - they have a scam and they're going to squeeze every last drop out of it.
Their marks, however, are a different matter.
Sooner the AI bubble pops the better
They have a Plan B.
Japan have promised to invest $500bn in the US in return for lower tariffs. Other nations are doing similarly, but with smaller numbers.
If this happens before the AI bubble pops, those nations will carry the can, insulating the US tech sector and US economy from most of the damage.
Trump is now off to Asia to collect those cheques. They can't spend all of that cash on stuff like LPG and soya beans (although Japan are reducing soya purchases from Brazil, who have upset Trump and switching to US sources). So they will have to invest it elsewhere, and I suspect they will be directed into AI. The UKG are already taking cash from other, better things to spend on AI.
You have to admire the plan here. When the banks and private investors get the Ponzi vibes from a bubble, that just leaves politicians, who know nothing about AI but love a bandwagon. If Trump can bully other governments to invest in US tech, he can beggar his 'allies' and airbag much of the damage to the US economy when the bubble bursts.
Not covered in the mainstream media is the global damage from the taxiffs being imposed without mechanisms for payment, which has buggered sales to the US. Until everyone can work out how much has to be paid and get it from American customers before posting goods, a whole strata of trade has flatlined. The refusal of the mainstream media to cover this suggests that there is an agenda at work, maybe a desire to control trade by only allowing it through larger channels.
When the bubble pops...
So what we're saying is that the only reason the US economy hasn't tanked yet is because companies are pumping money into the "AI" bubble?
That's going to make the effect on the US much more serious when the bubble finally pops.