LONDON: Never has so much cash flowed into a new technology as is pouring into AI, eclipsing the sums splurged on railways or the internet when those technological revolutions sucked in capital. Cumulative spending globally on data centers alone could top USD30 trillion by 2050, according to a projection by PwC, almost matching the value of outstanding US Treasuries.
It “dwarfs” what was spent in the railroad or dotcom booms, even after adjusting for inflation, PwC said. Meanwhile, Anthropic, just one of the major firms in the AI race, plans to spend USD518 billion in coming years, according to the IPO prospectus seen by Reuters, which is more than 100 times its 2025 revenue.
Its backers say AI technology will be more transformational than the advent of steam engines and the industrialization they powered. Yet lurking behind the dizzying projections and huge outlays by AI companies, alongside sky-high valuations, lie assumptions about vast broad-based productivity gains and future profits with little evidence so far - or historical precedent - to be sure they can deliver, economists say.
PRODUCTIVITY GAINS ‘REMAIN ELUSIVE’
JP Morgan wrote in August that broad-based productivity gains in the US, which leads the AI race, “remain elusive”, raising questions about the sustainability of AI valuations.
A Bain & Company study said productivity gains from existing markets would not be enough to justify current outlays and “entirely new markets must emerge to close the funding gap”, suggesting those could range from using AI-guided robots to developing new materials for batteries and semiconductors.
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