BofA warns of risks of a prolonged AI correction for the global economy — Fortune
In the United States, economists at BofA Global Research said that a prolonged correction in the market for assets related to artificial intelligence poses a significant risk to the global economy. Investors are increasingly concerned about the sustainability of the current AI boom, while rising capital expenditures are increasing risks, Fortune reports.
According to BofA analysts, a slowdown in the AI boom could directly affect economic growth, as well as through the wealth effect: a decline in stock values could weaken consumer spending. Economists also linked part of the rise in interest rates to borrowing needed to finance large-scale construction of AI infrastructure.
Voting on data centers
On Tuesday, voters in 10 US states are set to consider 41 local initiatives concerning data centers, from new requirements for developers to a complete ban on construction. According to Axios data cited by Fortune, all six such initiatives already considered this year in New Hampshire, Wisconsin, Michigan, and California ended in decisions against data center development.
In Texas, Governor Greg Abbott suspended approvals for new data centers until an audit is completed following backlash in rural communities. In Ohio, 21 local initiatives related to data centers were put to a vote. Goldman Sachs analyst Alec Phillips suggested that attention to the issue would decrease somewhat after the elections, although Congress may limit tax incentives for such facilities.
More current news is available on the UA.News Telegram channel Telegram.
Scale of AI investment
Spending on data center construction in the United States reached a preliminary record annual level of $84.95 billion in August, up 73% from a year earlier, according to the US Census Bureau. Goldman Sachs economists estimated that investment in AI-related equipment is now $613 billion above the 2022 level, or about 1.9% of GDP.
According to Goldman Sachs estimates, the largest technology companies may spend about $800 billion on capital investment this year, 96% more. Next year, analysts expect these expenditures to rise to $1.2 trillion.
AI and the labor market
Goldman Sachs, citing Census Bureau data, reported that 24.6% of US companies already use AI in at least one business function, while 28.6% plan to begin doing so within six months. In information, professional services, and finance, the technology's adoption rate is approaching half of companies.
The bank's analysts noted that industries with higher AI usage have weaker employment growth and higher unemployment. At the same time, data center construction has supported employment: Goldman Sachs estimated that the number of related jobs has increased by about 315,000 since 2022 compared with broader trends in the construction sector.
