Whether that argument holds is the most consequential open question in economics right now — and not everyone on Wall Street is buying it.
The gap between AI’s micro-level fireworks and its macro-level footprint is real, documented, and striking.
AI is already delivering task-level productivity gains that would have seemed implausible five years ago: software developers completing 55% more work with AI coding tools, customer support agents resolving 14% more tickets, professional writers finishing projects 37% to 40% faster.
BofA said AI is different when compared to previous innovations such as electricity or information and communication technology. The key difference, the bank argued, is that it can have an impact across a broader part of the economy than those previous advances, and “small improvements on this front can easily magnify the impact on aggregate productivity 10 times over the next decade.” BofA’s case rests heavily on the view that AI will follow the same J-curve — delayed impact followed by rapid acceleration.
BofA’s bull case is not a forecast so much as an arithmetic exercise in what happens when conditions change — and the bank is explicit that the conditions driving that change are reasonable to expect.
Doubling AI’s task reach from 20% to 40%, everything else equal, more than doubles aggregate productivity gains. If AI becomes cheap enough that all currently transformable tasks make economic sense to automate, gains multiply by more than seven. Add capital deepening — companies investing more as the return on capital rises — and the numbers get larger still.
But BofA makes a distinctive argument about innovation itself. Whereas electricity was powerful in automating physical processes, and the internet moved information faster, neither technology made inventing new things faster. AI can — by assisting research, accelerating hypothesis generation and augmenting the cognitive work that produces breakthroughs.
Cowen’s 2.5% is still, in his view, transformative. Against the backdrop of $39 trillion in national debt, that delta is the difference between a debt spiral and a manageable fiscal path. “You feel we’re screwed,” he told the audience. “My kids are screwed, grandkids are screwed … But if our economy can grow at 2.5%, instead of 2%, that debt, rather than exploding and making us the next Greece, that debt actually converges to a manageable level.”
Strip away the valuation disagreement and BofA and Panmure Liberum share more common ground than their conclusions suggest. Both believe AI will materially change the economy. Both acknowledge the gap between task-level gains and aggregate productivity is real. Both identify organizational friction — not model capability — as the primary constraint on near-term macro impact.
The disagreement is not about whether the technology works. It is about whether the investment cycle has outrun the technology’s current economic contribution so dramatically that a correction is now the most likely near-term path — even if the long-term productivity boom eventually arrives on the other side of it.
