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AI Spending, of course, a key focus during earnings this quarter. Apple, Meta, Alphabet all reporting a massive jump in AI spend. Total capex spend reaching 116 billion leads to plenty of bubble talk on the street as you know. But our next guest says those spending levels are, in fact, sustainable. Let's bring in Goldman Sachs economist Joseph Briggs to talk about it.

Host

Joseph Briggs

There's a common narrative that AI spending is unprecedented in nominal terms, but relative to GDP, it's presently a little below 1%, which is below historical infrastructure investment peaks of 2-5% of GDP. We expect spending to continue to grow and potentially reach 2% of GDP as AI adoption increases.

How large is the spending universe when backing into the 1% figure?

Host

Joseph Briggs

We estimate annualized spending around $250-300 billion based on hyperscaler capex, revenues of companies exposed to AI buildout, and national accounts data on data centers, semiconductors, and servers. This number is growing and may already be above $300 billion.

How does the expected productivity boost from AI compare to the internet era?

Host

Joseph Briggs

We expect AI to lead to about a 15% gross uplift in labor productivity over a decade, similar to what we saw with the internet and electric motor adoption in the early 1900s.

How much of that productivity boom are we witnessing now?

Host

Joseph Briggs

Currently very little. Adoption is still low, around 10% of companies using AI for regular production, though this is increasing. We forecast the first GDP boost from AI in 2027, rising gradually into the 2030s.