‘I won’t go into particular names, but they actually have earnings’
Chairman of the Federal Reserve Jerome Powell I don’t think there is an AI boom another dotcom bubble. In fact, he made that distinction clear on Wednesday, arguing: the current wave of AI investment It is based on for-profit firms and real economic activity rather than speculative exuberance.
“I won’t go into specific names, but they actually have gains,” Powell told reporters after the Fed’s policy meeting.
“These companies… actually have business models and profits and things like that. So this is something that’s really different from the dotcom bubble,” he added.
The comments appear to be Powell’s most direct acknowledgment yet that corporate development of AI involves hundreds of billions of dollars. data center and semiconductor investments— It has become a true engine of US growth.
Powell emphasized that the explosion in AI spending is not due to monetary policy or cheap money.
“I don’t think interest rates are an important part of the AI or data center story,” he said. “This is based on long-term assessments that this is an area where there will be a lot of investment and increased productivity.”
This statement contradicts market narrative that easing financial conditions could fuel a tech asset bubble. Instead, Powell suggested the AI build is more structural: a bet on the long-term transformation of business. From Nvidia On track to generate half a trillion dollars in revenue Hundreds of billions of dollars worth of Microsoft and Alphabet capital expenditure The scale of the plans is unprecedented. But it’s also grounded, Powell says.
Goldman Sachs agrees. Chief US economist Joseph Briggs argued in a research note titled “AI Spending Boom Not Too Big” that “projected investment levels are sustainable, but it is less clear what the ultimate winners of AI will be.”
Briggs and his team estimated that the productivity unleashed by AI could be worth $8 trillion in present value to the U.S. economy, and potentially as much as $19 trillion in high-end scenarios.
“We are not interested in the total amount of AI investment,” the Goldman team wrote. “AI investment as a share of US GDP is lower today (<1%) than in previous major tech cycles (2%-5%).” In other words, there is still plenty of room to run.
Powell’s framework reflects this view: The AI race, though frothy at times, is financed primarily by corporate cash flow rather than speculative debt.
Powell noted that a wave of investment has emerged in the real economy. “This is our investment in equipment and all the things that go into building data centers and fueling AI,” he said. “This is clearly one of the biggest sources of growth in the economy.”
