US companies are becoming increasingly hooked on artificial intelligence spending, and questions are growing whether this investment boom is hiding a weaker economic picture.
Despite a contraction in the first quarter, following President Donald Trump’s sweeping tariff announcement, the US economy has defied slowdown expectations this year, with estimations of 2025 GDP growth ranging between 1.7 per cent and 3 per cent.
While moderate increases in tariffs have partially contributed to these revisions, there is another engine behind US growth this year: AI.
Analysis from global investment firm KKR found that AI-related capex for the four largest hyper-scalers was more than $350 billion this year. UBS said it forecasts global AI capex spending to hit $423 billion in 2025 (up from its previous $375 billion estimate), before eclipsing $500 billion next year.
Tim Bajarin, a technology analyst who has served as a consultant for Apple, IBM, Xerox and Microsoft, said that there’s “cause for concern” as to whether the economic growth is substantive, but dismissed comparisons to the 1990s-era dotcom bubble.
“The fundamentals are strong compared to other hype cycles,” Mr Bajarin said, noting how AI tools such as Gemini and ChatGPT have hundreds of millions of users.
“The AI technology is richer, deeper and more focused.” He added that the billions of dollars being poured into data centres have “lasting value”.
AI in the data
New projections released by the US Federal Reserve showed America’s economy will expand at a 2.3 per cent pace next year, an increase of half a percentage point from its September forecast.
Part of this has been resilient consumer spending, Fed chairman Jerome Powell told reporters last week.
“And, to another degree it is … that AI spending on data centres and related to AI that has been holding up business investment,” he said.
The AI boom has led to strong growth in business equipment investment this year. Investment in equipment and software related to AI is forecast to grow by 9.9 per cent this year, according to the Equipment Leasing and Finance Foundation.
And while tariffs have weighed down exports and imports, Matthew Martin, senior US economist at Oxford Economics, estimated that imports for computers and semiconductors are up between 40 per cent and 50 per cent year-on-year.
“So the fact that imports are still growing there, despite increased tariffs, obviously shows that there’s quite a bit of strength there,” he said.
With demand for data centres increasing, concerns are mounting over the rising energy costs for these large-scale infrastructure projects that require huge amounts of energy to function.
The International Energy Agency projects global electricity demand from data centres to more than double over the next five years, with the effects to be most felt in the US and Japan. Those rising energy costs, in turn, ultimately would be passed on to consumers in the form of higher electricity bills, potentially blunting economic growth and constraining spending.
“I think energy is a major constraint to the building of these,” said Sean McDevitt, a partner at global consulting firm Arthur D Little.
“We’re not talking about megawatt data centres any more. These are gigawatt data centres. We’re not talking about buildings … These things look like industrial zones now.”
Natalie Hwang, founding managing partner at Apeira Capital, said she believes energy costs define the AI story rather than weaken it.
“And the next phase of AI will be led by the companies and the regions that can deliver intelligence with the lowest energy footprint,” pointing in particular to the Middle East’s energy abundance.
Record valuations
Concerns around rising energy costs have led to recent market turbulence, as has the future profit of companies relying on AI, testing market resilience that has ridden the investment boom this year.
AI spending has helped US markets overcome April’s tariff blip to continue a remarkable bull run, with all three Wall Street indices closing at record highs on several occasions this year.
The top five companies in the S&P 500 – Nvidia, Apple, Microsoft, Amazon and Alphabet – make up roughly 30 per cent of the tech-heavy index.
The Fed, International Monetary Fund and other financial institutions have characterised these AI valuations as “stretched”, leading to new debate over the potential of a bubble and a possible market correction if productivity gains are not fully realised.
But economists and analysts also argue that, unlike the dot-com bubble three decades ago, the companies at the nexus of the AI investment frenzy are posting profits and have business models.
“If we see a correction next year, I believe it will clarify the investment opportunity in AI infrastructure, rather than weaken it. Because a market reset typically shifts capital from speculation to fundamentals,” Ms Hwang said.
Boom to continue
Hyper-scalers show no signs of slowing down their AI spending.
Alphabet, Amazon, Meta, Microsoft and Oracle have all raised their AI capex guidance, according to their most recent earnings reports. Private companies like Anthropic and OpenAI are also making large investment commitments.
And the increase in demand is expected to have compounding effects on the US economy with spending on construction, technology and energy required to bring those types of facilities online.
“AI is an industrial infrastructure story,” Mr McDevitt said.
The AI spending comes as the US exhibits some stagflationary behaviour, with the world’s largest economy faced with higher inflation and lower job gains.
A US AI pulse survey released by accounting firm EY earlier this month found companies investing in AI are seeing AI-driven productivity gains. And, while some companies are making AI-related layoffs, the survey found most productivity gains are being reinvested to upskill talent and boost resilience.
Mr Martin said productivity gains could potentially weigh on hiring, as companies can now do more with fewer employees, but stronger economic growth could lead to higher job creation elsewhere. At the same time, it could be positive for the inflation outlook because companies can increase employees’ wages without having to raise prices by a large amount.
“I think there’s a lot of uncertainty, but ultimately, the increased productivity would be a very positive for the economy overall,” Mr Martin said.
match info
Chelsea 2
Willian (13′), Ross Barkley (64′)
Liverpool 0
The%20specs%3A%202024%20Mercedes%20E200
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Gulf Under 19s final
Dubai College A 50-12 Dubai College B
COMPANY%20PROFILE%3A
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Benefits of first-time home buyers’ scheme
Priority access to new homes from participating developers
Discounts on sales price of off-plan units
Flexible payment plans from developers
Mortgages with better interest rates, faster approval times and reduced fees
DLD registration fee can be paid through banks or credit cards at zero interest rates
THE SIXTH SENSE
Starring: Bruce Willis, Toni Collette, Hayley Joel Osment
Director: M. Night Shyamalan
Rating: 5/5
The Brutalist
Director: Brady Corbet
Stars: Adrien Brody, Felicity Jones, Guy Pearce, Joe Alwyn
Rating: 3.5/5
Anghami
Started: December 2011
Co-founders: Elie Habib, Eddy Maroun
Based: Beirut and Dubai
Sector: Entertainment
Size: 85 employees
Stage: Series C
Investors: MEVP, du, Mobily, MBC, Samena Capital
The President’s Cake
Director: Hasan Hadi
Starring: Baneen Ahmad Nayyef, Waheed Thabet Khreibat, Sajad Mohamad Qasem
Rating: 4/5
APPLE IPAD MINI (A17 PRO)
Display: 21cm Liquid Retina Display, 2266 x 1488, 326ppi, 500 nits
Chip: Apple A17 Pro, 6-core CPU, 5-core GPU, 16-core Neural Engine
Storage: 128/256/512GB
Main camera: 12MP wide, f/1.8, digital zoom up to 5x, Smart HDR 4
Front camera: 12MP ultra-wide, f/2.4, Smart HDR 4, full-HD @ 25/30/60fps
Biometrics: Touch ID, Face ID
Colours: Blue, purple, space grey, starlight
In the box: iPad mini, USB-C cable, 20W USB-C power adapter
Price: From Dh2,099
Who’s who in Yemen conflict
Houthis: Iran-backed rebels who occupy Sanaa and run unrecognised government
Yemeni government: Exiled government in Aden led by eight-member Presidential Leadership Council
Southern Transitional Council: Faction in Yemeni government that seeks autonomy for the south
Habrish ‘rebels’: Tribal-backed forces feuding with STC over control of oil in government territory
RESULTS
5pm: Maiden | Dh80,000 | 1,600m
Winner: AF Al Moreeb, Tadhg O’Shea (jockey), Ernst Oertel (trainer)
5.30pm: Handicap | Dh80,000 | 1,600m
Winner: AF Makerah, Adrie de Vries, Ernst Oertel
6pm: Handicap | Dh80,000 | 2,200m
Winner: Hazeme, Richard Mullen, Jean de Roualle
6.30pm: Handicap | Dh85,000 | 2,200m
Winner: AF Yatroq, Brett Doyle, Ernst Oertel
7pm: Shadwell Farm for Private Owners Handicap | Dh70,000 | 2,200m
Winner: Nawwaf KB, Patrick Cosgrave, Helal Al Alawi
7.30pm: Handicap (TB) | Dh100,000 | 1,600m
Winner: Treasured Times, Bernardo Pinheiro, Rashed Bouresly
Abu Dhabi GP weekend schedule
Friday
First practice, 1pm
Second practice, 5pm
Saturday
Final practice, 2pm
Qualifying, 5pm
Sunday
Etihad Airways Abu Dhabi Grand Prix (55 laps), 5.10pm
How Islam’s view of posthumous transplant surgery changed
Transplants from the deceased have been carried out in hospitals across the globe for decades, but in some countries in the Middle East, including the UAE, the practise was banned until relatively recently.
Opinion has been divided as to whether organ donations from a deceased person is permissible in Islam.
The body is viewed as sacred, during and after death, thus prohibiting cremation and tattoos.
One school of thought viewed the removal of organs after death as equally impermissible.
That view has largely changed, and among scholars and indeed many in society, to be seen as permissible to save another life.
Jeff Buckley: From Hallelujah To The Last Goodbye
By Dave Lory with Jim Irvin
England-South Africa Test series
1st Test England win by 211 runs at Lord’s, London
2nd Test South Africa win by 340 runs at Trent Bridge, Nottingham
3rd Test July 27-31 at The Oval, London
4th Test August 4-8 at Old Trafford, Manchester
India squads
T20: Rohit Sharma (c), Shikhar Dhawan, KL Rahul, Sanju Samson, Shreyas Iyer, Manish Pandey, Rishabh Pant, Washington Sundar, Krunal Pandya, Yuzvendra Chahal, Rahul Chahar, Deepak Chahar, Khaleel Ahmed, Shivam Dube, Shardul Thakur
Test: Virat Kohli (c), Rohit Sharma, Mayank Agarwal, Cheteshwar Pujara, Ajinkya Rahane, Hanuma Vihari, Wriddhiman Saha (wk), Ravindra Jadeja, Ravichandran Ashwin, Kuldeep Yadav, Mohammed Shami, Umesh Yadav, Ishant Sharma, Shubman Gill, Rishabh Pant
The specs: 2019 Mini Cooper
Price, base: Dh141,740 (three-door) / Dh165,900 (five-door)
Engine: 1.5-litre four-cylinder (Cooper) / 2.0-litre four-cylinder (Cooper S)
Power: 136hp @ 4,500rpm (Cooper) / 192hp @ 5,000rpm (Cooper S)
Torque: 220Nm @ 1,480rpm (Cooper) / 280Nm @ 1,350rpm (Cooper S)
Transmission: Seven-speed automatic
Fuel consumption, combined: 4.8L to 5.4L / 100km
The specs
Engine: four-litre V6 and 3.5-litre V6 twin-turbo
Transmission: six-speed and 10-speed
Power: 271 and 409 horsepower
Torque: 385 and 650Nm
Price: from Dh229,900 to Dh355,000
Places to go for free coffee
Cherish Cafe Dubai, Dubai Investment Park, are giving away free coffees all day.
La Terrace, Four Points by Sheraton Bur Dubai, are serving their first 50 guests one coffee and four bite-sized cakes
Wild & The Moon will be giving away a free espresso with every purchase on International Coffee Day
Orange Wheels welcome parents are to sit, relax and enjoy goodies at ‘Café O’ along with a free coffee
The biog
DOB: 25/12/92
Marital status: Single
Education: Post-graduate diploma in UAE Diplomacy and External Affairs at the Emirates Diplomatic Academy in Abu Dhabi
Hobbies: I love fencing, I used to fence at the MK Fencing Academy but I want to start again. I also love reading and writing
Lifelong goal: My dream is to be a state minister
‘Midnights’
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UK’s AI plan
AI ambassadors such as MIT economist Simon Johnson, Monzo cofounder Tom Blomfield and Google DeepMind’s Raia Hadsell
£10bn AI growth zone in South Wales to create 5,000 jobs
£100m of government support for startups building AI hardware products
£250m to train new AI models
Tips to stay safe during hot weather
Stay hydrated: Drink plenty of fluids, especially water. Avoid alcohol and caffeine, which can increase dehydration.
Seek cool environments: Use air conditioning, fans, or visit community spaces with climate control.
Limit outdoor activities: Avoid strenuous activity during peak heat. If outside, seek shade and wear a wide-brimmed hat.
Dress appropriately: Wear lightweight, loose and light-coloured clothing to facilitate heat loss.
Check on vulnerable people: Regularly check in on elderly neighbours, young children and those with health conditions.
Home adaptations: Use blinds or curtains to block sunlight, avoid using ovens or stoves, and ventilate living spaces during cooler hours.
Recognise heat illness: Learn the signs of heat exhaustion and heat stroke (dizziness, confusion, rapid pulse, nausea), and seek medical attention if symptoms occur.
Sri Lanka v England
First Test, at Galle
England won by 211
Second Test, at Kandy
England won by 57 runs
Third Test, at Colombo
From Nov 23-27
Draw for Europa League last-16
Istanbul Basaksehir v Copenhagen; Olympiakos Piraeus v Wolverhampton Wanderers
Rangers v Bayer Leverkusen; VfL Wolfsburg v Shakhtar Donetsk; Inter Milan v Getafe
Sevilla v AS Roma; Eintracht Frankfurt or Salzburg v Basel; LASK v Manchester United
The specs: 2019 BMW i8 Roadster
Price, base: Dh708,750
Engine: 1.5L three-cylinder petrol, plus 11.6 kWh lithium-ion battery
Transmission: Six-speed automatic
Power: 374hp (total)
Torque: 570Nm (total)
Fuel economy, combined: 2.0L / 100km
COMPANY%20PROFILE
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More from Neighbourhood Watch:Mohammed bin Zayed Majlisif you go
The flights
Air Astana flies direct from Dubai to Almaty from Dh2,440 per person return, and to Astana (via Almaty) from Dh2,930 return, both including taxes.
The hotels
Rooms at the Ritz-Carlton Almaty cost from Dh1,944 per night including taxes; and in Astana the new Ritz-Carlton Astana (www.marriott) costs from Dh1,325; alternatively, the new St Regis Astana costs from Dh1,458 per night including taxes.
When to visit
March-May and September-November
Visas
Citizens of many countries, including the UAE do not need a visa to enter Kazakhstan for up to 30 days. Contact the nearest Kazakhstan embassy or consulate.
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