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Crazy amounts of money are being thrown at AI right now, particularly on chips and power.Analysts at Goldman Sachs have a funny way of saying it’s sustainable. They dismiss concerns, arguing investment levels are sustainable. Why? Because AI deployments are boosting productivity.That’s a funny way of justifying it a day after Sam Altman announced that OpenAI will allow adult erotica on ChatGPT.In any case, Goldman argues that AI capex is at roughly 1% of GDP in 2025 and will rise to 2-2.5% in 2027 and 2028. They estimate that generative AI could lift labor productivity by 1.5 percentage points annually as adoption spreads.I think that’s all a bit fanciful as it’s entirely unclear that the people making the investments are the ones who will capture the ROI from the productivity boosts. Chips also have a very short life, so there could easily be a cash-incinerating time mismatch.
This article was written by Adam Button at investinglive.com.
💡 DMK Insight
DMK Insight: The surge in AI investment, particularly in chips and power, reflects a broader trend of companies seeking to enhance productivity through technology. Goldman Sachs' assertion that these investment levels are sustainable suggests a belief in the long-term value of AI, despite short-term volatility. However, investors should remain cautious, as the justification for such spending may not hold if productivity gains do not materialize as expected.
📮 Takeaway
Monitor AI productivity gains closely to assess the sustainability of current investment levels.
