If you've been following AI boom skeptics like Ed Zitron, you've heard this a dozen times in more detail and in far less dry language. Over the past year or so, this message has been increasingly making its way into the discourse of mainstream economists and publications like the Financial Times, but it's still notable when a collection of the world's central bankers starts sounding just a bit panicked, albeit in their characteristically stuffy way.
From the Bank of International Settlements (BIS) annual report: In the near term, the ongoing AI investment boom raises questions about the sustainability of the current economic expansion. The five largest hyperscalers are set to spend over a trillion US dollars on AI-related capital expenditure from 2025 through 2026. These commitments are outpacing earnings and the free cash flow of these firms, leading some to issue debt to raise additional financing.
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Disappointment in returns could trigger a sudden pullback in financing and turn the capex boom into a protracted investment bust, with potential knock-on effects on financial conditions…should hyperscalers slow or halt the aggressive pace of capex deployment, many borrowers across the supply chain could struggle to replace lost revenue and service their debt.
The long-term commercial impact of large language models is a topic for another day. It should be noted that the BIS report is cautiously optimistic on this timeframe (I would put myself down in the "big, but not nearly big enough" category), but the concerns about the near-term future of the AI bubble as currently configured are definitely growing more widespread.