How much revenue is needed to justify the current AI spend?

Summary

Think about the railroads in the second half of the 19th century. When they failed, it wasn’t just the collapsing bonds held by investors, often pledged as collateral for other loans, that pulled down the economy. It was also the inability of the railroads to raise additional capital to order new steel and railroad ties, along with the thousands who got laid off at railroad yards and locomotive manufacturing plants. Then, there were huge multiplier effects to all of this. Railroads became dominant, not just to the financial system, but to the real economy as well. They became so important, that they would become responsible for periodic and deep economic depressions every time they experienced funding stresses.How big is AI to our economy?? Let’s use some abstract math that is likely to be rather imprecise, yet directionally credible. From a starting point, let’s work with my $400 billion capex estimate for 2025. Now add in some unallocated corporate expense, some R&D, some spending on new electricity generation capacity, plus some other expenses, and the AI buildout likely represents approximately 1.5% of expected 2025 US GDP of approximately $30 trillion. Now, nothing economic happens in a vacuum. Every dollar spent has a multiplier downstream in other industries to support this spend. Is it irrational to expect that with a bit of a multiplier, AI capex is clocking in closer to 2% of GDP?? Which is a good chunk of total expected US economic growth this year. Actually, without the AI buildout, the US economy would probably be teetering on the cusp of a recession (which certainly mirrors the view from many of the industries that I track).Now, the math gets a bit trickier when contemplating the Wealth Effect engendered by all of this. While much has been written on this topic, I don’t think anyone really knows how to calculate or quantify it. What we do know, is that roughly half of all spending comes from the top 10%, frequently those who have appreciating assets. W...