𝙳𝚖𝚢𝚝𝚛𝚘 𝙻𝚢𝚝𝚘𝚟𝚌𝚑𝚎𝚗𝚔𝚘

A non-obvious second effect of the enormous AI capex spend may be that it's masking the deterioration of the US economy under the surface. While the aggregate economic stats may look just fine, economy is becoming ever more K-shaped with the lower half of th economy struggling ever more in terms of keeping up with cost of living increases, young graduates struggling to find jobs, and credit card and auto loan bills pilling up. The seemingly non-negotiable enormous capex spending has also an underappreciated crowding out effect on the rest of the real economy. First, the AI capex drives up input cost for non-AI manufacturing industries from materials to labor. Indeed, manufacturing has been shrinking while data center capex surges. Secondly, if companies have to spend more on capex and expect more productivity from AI, they’ll hold back on hiring. It has already eaten into the hiring plans of even the highly profitable large cap tech companies. To rephrase @pmarca, AI is eating the world, but maybe not quite in the way we expected.