Donovan’s analysis includes boosts to growth from the now-archetypal data center leading to economic activity from construction workers, programmers and so forth, which have helped lift U.S. growth. “But AI potentially lowers current growth by diverting resources,” he said. For example, he cited research by Bloomberg showing that as regional electricity prices are pushed higher by the power needs of data centers, the spiking bill for consumers results in less money to spend elsewhere in the economy. Likewise, energy-intensive businesses will face higher costs, too. This risks “creating a gap in the economic growth story,” Donovan said, because this dynamic could force some currently economically productive businesses to close. In other words, does the local small business have to die so the data center can live?
Morgan Stanley’s Shalett flags a different concern, that even the supposedly dynamic new AI-based businesses just aren’t growing so fast right now. She blames “market saturation or monopolies—as seen in search and digital advertising—and increasing competition,” citing cloud services, where new entrants are competing on price in a battle for market share. She’s also worried about huge amounts of venture capital flocking to fledgling business models, and advised investors to rethink their exposure to small-cap and unprofitable tech firms.
Bhave’s team is generally more bullish. While allowing that risks aren’t off the table in the medium term, they argue that for now at least, AI appears to be a “net positive” for growth. Just look at the GDP figures from the first half, which surprised even BofA’s relatively optimistic expectations. The rebound to an annualized rate of 1.6% is “particularly resilient considering the missing imports problem” in the first quarter due to the Trump tariff shock, which “blurs the picture” a bit. Investment in AI is just a huge force driving the economy forward, they say.
Another voice is former Obama administration economist Jason Furman, on the faculty at Harvard, who calculated in late September that without data centers, those GDP figures would look a bit different. Subtracting all that capex results in a growth of just 0.1% on an annualized basis for the first half of 2025. To Donovan’s point, some other productive activities would have taken its place, Furman added: “Absent the AI boom we would probably have lower interest rates [and] electricity prices, thus some additional growth in other sectors. In very rough terms that could maybe make up about half of what we got from the AI boom.” Still, the question of AI and growth isn’t a straightforward one.
