AI investments are driving U.S. economic growth as capital spending surges from companies hurrying to build out the energy infrastructure and computing power necessary to power increasingly popular AI applications. ChatGPT, AI-summarized search results, and AI tools for generating images are used by more consumers every day, requiring the construction of new data centers, information processing equipment, and hardware for electricity transmission.
Just How Big Is the Growth?
Although this spending has returned low gains so far in both jobs and revenue, companies are seeing large gains in the stock market. 2024 closed strong due largely to AI investments by tech firms Amazon, Apple, Alphabet (parent to Google), Facebook, Meta Platforms (parent to Instagram), Microsoft, Nvidia, and Tesla, companies that together comprise one-third of the entire value of the S&P 500 Index and accounted for half the index’s gains in 2024. Nvidia, Apple, and Microsoft are all on track for a possible $4 trillion valuation this year, with some speculation among investors that Amazon could reach $5 trillion this decade.
According to Crunchbase, startups also broke a stock market record in 2024. Approximately one-third of all startup investments went to AI-related companies.
This growth is also driving up share prices for electricity and infrastructure companies. In September, Constellation Energy announced a partnership with Microsoft to restart one of the nuclear reactors at Pennsylvania’s Three Mile Island. Last week, President-Elect Donald Trump revealed a $20 billion partnership with a developer from the United Arab Emirates to build new data centers, and AWS (Amazon’s cloud computing group) said it will spend $11 billion on investments related to AI in Georgia. Microsoft has also announced plans to invest $80 billion in data centers to empower AI technology in fiscal year 2025. In December, Softbank in Japan held a joint press conference with Trump to share their plan for $100 billion in U.S. AI-related spending.
Employ America’s executive director, Skanda Amarnath, estimates that in Q3 2024, capital spending on AI accounted for between 16% and 20% of real gross domestic product growth. Amarnath sees a “tailwind for growth in 2025” and suggests that as a share of total spending outlays, investments in AI are likely to surpass the 1990s’ dot-com boom’s share of GDP and grow as large as housing in the first decade of this century.
What’s Missing from the Picture: New Jobs
What no one is seeing, however, is any burst in job creation, though companies engaged in high capital spending in AI suggest that tens of thousands of jobs may eventually be created. Detractors of the new technology raise concerns about job losses, noting that AI is intended to automate roles previously filled by humans, including writing, coding, illustrating, translating, and artistic production.
According to data from the Associated General Contractors of America, the construction industry saw healthy annual job growth (2.5%) in 2024, some of which was driven by a 43.1% increase in data center construction over the previous year. Employment in utilities reached a 20-year high. Elsewhere, the picture is different; growth has flatlined in white-collar sectors such as professional and business services that have benefited from previous periods of increased tech spending. Job growth in software engineering has faltered, as well, with job postings on Indeed returning to levels seen before the pandemic levels.
“[AI] hasn’t created a huge employment boom,” says Ed Yardeni, president of consulting firm Yardeni Research. “AI increases the productivity of programmers, so maybe, on balance, we’re not going to see a big increase in the numbers of programmers hired to produce AI. The payoff will have to be on productivity.”
Nevertheless, U.S. economic growth and the stock market are increasingly staked on growing anticipation of the payoffs to come.
