The phenomenon is novel enough to have led to the creation of a separate category to describe said firms and their investment activity: the \u201chyperscalers\u201d. The five largest AI<\/a> hyperscalers are Amazon, Alphabet, Microsoft, Meta and Oracle. They are broadly defined as the firms spending hundreds of billions of dollars on building AI computing power \u2014 through data centres and software \u2014 to meet expectations of exploding demand for AI over the next decade.<\/p>\n Capital investment from the hyperscalers has risen from $125 billion two years ago, to $200 billion in 2024, and is on course to reach close to $350 billion this year. Their stock market valuations have reached record highs.<\/p>\n The numbers are gigantic. The five largest listed US tech companies are worth 16 per cent of the entire global stock market \u2014 more than the combined equity valuations of Europe\u2019s largest 50 firms, and the leading quoted companies in the UK, India, Japan and Canada. The largest ten listed US companies make up a quarter of the global market and are worth $25 trillion, having grown by $5 trillion this year. Nvidia, the chipmaker, hit a $5 trillion market valuation last week<\/a>.<\/p>\n \u2022 London stockpicker has whale of a time riding on Nvidia wave<\/a><\/p>\n The AI spending bonanza is largely a US phenomenon. The hyperscalers, and rapidly growing private companies like Anthropic, are all American. There are close to 5,500 data centres in the US, compared with just under 550 in Germany and about 520 in the UK. That means that the AI investment boom, its impact on the economy, jobs and workers, is becoming a preoccupation for the Federal Reserve, the US central bank, which is struggling to make sense of how it should respond. <\/p>\n Unlike the Bank of England, the Fed has not warned about an AI stock market bubble that could be inflating under its watch. Christine Lagarde, president of the European Central Bank, has hinted at the risks of a boom in AI spending on the continent, despite no clear evidence that this is happening anywhere in the eurozone this year. European imports of computers and IT related equipment have been stagnant since the release of OpenAI\u2019s ChatGPT in late 2022. Imports have more than doubled in the US, by contrast.<\/p>\n Christine Lagarde<\/p>\n ROBERTO MONALDO\/LAPRESSE\/AP<\/p>\n Lagarde and Andrew Bailey, governor of the Bank of England, are not contending with the challenges that face the Fed\u2019s Jerome Powell. The AI hype is becoming a seriously complicating factor for the central bank chief, whose job and institution is under fire from the White House.<\/p>\n To start, the investment boom has been immune to the Fed\u2019s monetary policy action. The US had been yanking up interest rates since 2022 in an attempt to make borrowing more expensive. Yet Fed policy has not touched the hyperscalers, which have been funding mass investment through their bumper earnings, rather than borrowing. The five hyperscalers are spending 60 per cent of their cash flows on building data centres. Borrowing costs have had next to no impact on their business decisions. \u201cI don\u2019t think interest rates are an important part of the AI data centre story,\u201d Powell told journalists last week.<\/p>\n Respected economists such as Jason Furman at Harvard think the AI gold rush has been the only thing keeping the US economy from slipping into recession this year. Even on more muted measures, the spending boom accounted for about 1.6 per cent out of the 3.8 per cent annualised GDP growth in the second quarter, according to Bank of America. That raises the question of whether the US economy\u2019s resilience in the face of President Trump\u2019s tariffs, migrant deportations and a government shutdown is built on a foundation of sand or on the most transformative technological innovation since the internet. Nobody \u2014 including Powell, economists and investors \u2014 knows the answer. <\/p>\n But while Fed\u2019s interest rate policy doesn\u2019t touch the fastest growing part of the stock market, the hyperscalers\u2019 impact on the US labour market and economy is already significant. Amazon has said it will cut 14,000 roles<\/a> as a result of its transformation for the AI age. Meta and Salesforce have also announced cuts at a time when they are reporting bumper corporate profits. <\/p>\n![\"European](\"https:\/\/www.newsbeep.com\/uk\/wp-content\/uploads\/2025\/11\/\/3aef7306-4763-4f94-846d-ee57918e192d.jpg\")
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