AI Buildout Is the Biggest Investment Boom in U.S. History at $10.3 Trillion, Brookings Says
The AI buildout is the biggest investment boom in U.S. history
Financing the AI buildout will cost $10.3 trillion from 2025 to 2032, an average of 3.63% of U.S. GDP every year, according to a new Brookings study by Stijn Van Nieuwerburgh of Columbia University.
That makes the projected buildout larger relative to the economy than the canal, railroad, electrification, highway and telecommunications booms. The railroad boom of 1870 to 1890 absorbed about 2.24% of GDP a year, the interstate highway system about 1.13%, and the telecom and fiber boom about 1.10%.
The spending covers data center buildings, power systems, networking infrastructure, and specialized chips and other equipment. The paper's central scenario has about 183 gigawatts of additional U.S. data center capacity completed by 2032.
The risk is moving off the balance sheet
Van Nieuwerburgh warns that financing is migrating from transparent on balance sheet spending by major corporations to opaque off balance sheet structures, including joint ventures, private credit, securitization, special purpose vehicles, lease commitments and loan guarantees.
Those structures depend on AI companies' cash flows and collateral values, which face "uncertain AI demand, rapid technological change, timely access to power and hardware, and the continued credit quality of a small number of tenants," he writes.
The five biggest spenders, Alphabet, Amazon, Meta, Microsoft and Oracle, are on course for a combined $4.2 trillion in capital spending over the four years to 2029, per FactSet data. The paper estimates the industry would need roughly $3.7 trillion in annual revenue by 2032 to generate adequate returns on the investment.
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How this could hit the options market
A $10.3 trillion capex cycle is the backbone of the AI trade. Sustained spending supports NVDA, AVGO and the hyperscalers MSFT, AMZN and GOOGL, and flow in those names around capex guidance has been the most reliable trend signal in the market.
The financing warning cuts the other way. If credit markets start pricing buildout risk, expect put buying in private credit exposed financials and in data center landlords, plus wider implied volatility across the AI complex into earnings season.
Power is the second order trade. A buildout that would double the electricity use of the entire U.S. residential sector keeps utilities and power equipment names in play, and unusual call flow there has repeatedly front run new data center announcements.
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