Will the trillion dollars being invested in AI offer tangible returns?

The artificial intelligence boom has triggered one of the costliest building sprees ever, yet no one knows if these investments will generate meaningful returns

- Natale Labia

Are the colossal sums being poured into artificial intelligence (AI) a ruinous waste of money, or an investment that will transform the world?

Few doubt the technology's potential. The real question is whether the spending the technology requires is economically viable. This is perhaps the most important question facing the global economy today, given how dependent global growth is on a financially and economically feasible future for AI.

The AI boom has triggered one of the costliest building sprees in history. Over the past three years, leading tech firms have committed more capital expenditure (capex) towards AI data centres, chips and energy than the US spent building its entire interstate highway system over four decades, even adjusted for inflation.

Unlike highways, however, no one can say what these investments will do for global productivity. Moreover, no one knows when, or even if, the companies funding the investments will earn their money back.

What does this spend look like?

This year alone, America's "hyperscalers" (to use the ghastly lexicon) - Amazon, Google, Meta and Microsoft - have pledged to spend a record $320-billion on capex, much of it on building massive data centres packed with specialised AI chips known as "AI accelerators".

This is a 40% jump from last year's record-setting $230-billion and amounts to about two-thirds of all inflation-adjusted capital spent on laying the telecom fibre-optic cables during the 1990s - a decade-long project that continues to underpin the entire internet. Now, four firms are spending nearly that much in a single year.