Edward Conard

Top Ten New York Times Bestselling Author

  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “There are an amazing number of good ideas and interesting points made in Unintended Consequences. The thinking underlying it, and the obvious depth of understanding of the author, are very impressive.” - Steven Levitt, coauthor of Freakonomics; 2004 John Bates Clark Medal
  • “Unintended Consequences is far smarter and more thought-provoking than most economics written for the general public” - Greg Mankiw, Harvard University, Former Chairman of the Council of Economic Advisors
  • “Unintended Consequences represents the most cogent and persuasive analysis of the Financial Crisis to date.” - Andrei Shleifer, 1999 John Bates Clark Medal Winner
  • “Unintended Consequences should be read by anyone who takes for granted the superiority of progressive taxation and has not thought carefully about the trade-offs involved.” - The New Republic
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “Unintended Consequences provides a provocative interpretation of the causes of the global financial crisis and the policies needed to return to rapid growth. Whether you agree or not, this analysis is well worth reading.” - Nouriel Roubini, New York University; Chairman, Roubini Global Economics
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
Upside of Inequality Oxford Unintended Consequences
Buy the Books
  • Macro Roundup
  • About Roundup
  • About Ed Conard
  • Highlights
  • Topics
  • Subscribe
Edward Conard
  • twitter
  • facebook
  • linkedin
  • youtube
  • Email
  • Text Message (SMS)
  • Twitter/X
  • LinkedIn
  • Facebook
  • WhatsApp Message
Subscribe to Macro Roundup Emails
  • Mentions 892
  • Primary focus 490
Showing 490 database articles primarily about Productivity
Currently filtering by:
  • Remove Productivity
  • Remove "primary topics only" restriction
  • Remove 'Database'
Show all 7,304 articles
For whatever topics you select (currently: "Productivity", "Cronyism", "Incentives/Risk-Taking", "Innovation/Research", "Institutional Capabilities", "Intangibles", "Investment", "Startups", "Workforce Reorganization"):
Choose search scope

Your importance filter 'Database' shows fewer articles.

Remove filters to see full article counts

Additive Growth

AI Summary. US total factor productivity has grown linearly rather than exponentially over roughly the past 90 years, rising by a constant increment each year. The authors argue that an additive model of knowledge accumulation fits the data better than a multiplicative one, so the apparent productivity slowdown reflects model misspecification because growth rates were never constant.

Thomas Philippon National Bureau of Economic Research
Date Posted:
April 21, 2022
Is Database:
Database

US Total Factor Productivity (TFP) has grown linearly over the past 90 years, challenging the notion of a TFP slowdown.

Does productivity grow by constant increments rather than constant rates?

Core argument: US Total Factor Productivity grew linearly rather than exponentially from 1933 to 2019, rising by 0.057 annually to reach a level of 8 by the end of the period.

Over the past 90 years, US Total Factor Productivity (TFP) has grown linearly, challenging the notion of a TFP slowdown. From 1933 to 2019, TFP increased by 0.057 annually, reaching a level of 8 by the end of the period. This linear growth is better captured by an additive model rather than a multiplicative one, as TFP increments consistently add to the stock of knowledge rather than multiplying it. The additive model predicts labor productivity increments increase with the square of the time horizon, contrasting with the exponential predictions of the geometric model. This approach explains the perceived TFP slowdown as a result of model misspecification, emphasizing that growth rates were never constant. The empirical evidence suggests that US growth is additive, with TFP increasing by 0.0245 points each year since 1947, aligning with observed trends in labor productivity and GDP per capita growth.

Takeaways by Macro Roundup® AI

  1. US Total Factor Productivity grew linearly rather than exponentially from 1933 to 2019, rising by 0.057 annually to reach a level of 8 by the end of the period.
  2. An additive model fits US TFP better than a multiplicative one, since increments add to the stock of knowledge rather than multiplying it, with TFP rising 0.0245 points per year since 1947.
  3. The additive model predicts labor productivity increments rising with the square of the time horizon and attributes the perceived TFP slowdown to model misspecification, arguing growth rates were never constant.

Thomas Philippon, "Additive Growth,"National Bureau Of Economic Research, April 2022, https://www.nber.org/papers/w29950

“…Model D, unlike model G, appears to have only one break over the period 1890-2019. We can formally test this idea following Bai and Perron (2003). The unconstrained test finds one break in the series around 1930 (the point estimate is 1933). We cantest H0: no breaks versus H1: break in 1933. The W statistic is 21.72 and the p-value is 0.0. I emphasize, however, that while the existence of a break is clear, the date is really an interval between the late 1920s and WW2. The date of the break is consistent with Field (2003)’s argument that “the years 1929- 1941 were, in the aggregate, the most technologically progressive of any comparable period in U.S. economic history.” This period corresponds to the large scale implementation of the discoveries of the second industrial revolution: electric light, electric power, and the internal combustion engine, as discussed in Jovanovic and Rousseau (2005). Gordon (2016) points out that it is somewhat surprising that “much of the progress occurred between 1928 and 1950,” several decades after the discoveries were made. Following David (1990), he explains the paradox by showing that the 1930s were a period of follow-on inventions, such as the perfection of the piston power-powered aircraft and television, and the increasing quality of machinery made possible by the large increases in available horsepowers and kilowatt-hours of electricity. Following these historical insights, figure 5 proposes an interpretation of US TFP from 1890 to 2019, using linear growth with one structural break in 1933 after the electrification revolution. We can summarize this idea in the following remark, keeping in mind that we normalize US TFP to 1 in 1890. Fact 5. From 1890 to 1933, TFP increases by.017 each year until it reaches a level around 1.75 in the early 1930s. From 1933 to 2019 TFP increases by.057 each year (3.3 p.p. of its level in 1933) to reach a level around 8 at the end of the sample….”

The outlier

Core Finding:"....There is no TFP slowdown, or, to put it differently, the perceived TFP slowdown is the result of using a misspecified model as a benchmark. Initial trend growth is around 2.5%. After 40 year, TFP doubles, and since increments are constant, the trend growth rate is half of what it used to be. After 60 years later, it is only one percent...."

Evidence from the United States, "...Figure 1 reveals a new fact and makes an important empirical point. The new fact is that there is no TFP slowdown in the US according to model D. The important empirical point is that, with realistic values for TFP growth rates, the distinction between models D and G requires at least 10 years of out-of-sample forecasts....US growth is better described as additive rather than multiplicative. Instead of stating that the average growth rate of TFP is 1.45%, which is correct but not particularly useful, it is more relevant to say that TFP increases by 0.0245 points each year starting from a normalized value of 1 in 1947. For labor productivity, both the additive growth model and the multiplicative growth model predict an increasing size of productivity increments, but at different speeds. The additive model D predicts that labor productivity increments increase with the square of the time horizon, while the geometric model G predicts exponentially increasing increments. Model G does not describe the data with a constant growth rate. Model D describes the data relatively well with year-on-year increments of about $1560 per full time worker ($0.87 per hour, assuming 1800 hours worked in a year) around 2010…”

Additive Growth: Extended Excerpt Image 1


U.S. TFP, 1890-2019

"...Figure 3 shows the raw and smoothed series....The data is from Bergeaud et al. (2016) and winsorized in the first and last percentiles to remove limit extreme outliers during WW2. The model is initiated over the first 10 observations, 1891 to 1900. As expected the trend growth of the economy changes over this long sample.....Table 1 shows that the volatility of TFP growth rates declines significantly over time...."

TFP growth is not exponential. New ideas add to our stock of knowledge; they do not multiply it. TFP has been growing linearly over the past 90 years in the US and the additive model beats the exponential model for every single country, developed or catching up, where TFP data is available. The TFP frontier appears to grow linearly within broad historical periods: 1650 to 1830, 1830 to 1930, and 1930 until today. Additive TFP growth predicts increasing growth of labor productivity and GDP per capita thanks to capital accumulation. This prediction also appears to be empirically accurate... The additive growth model explains the observed TFP slowdown as a simple side effect of model misspecification. We should not have expected growth rates to be constant in the first place. The additive model does not necessarily solve the research productivity puzzle....... since this puzzle is not about the stochastic process for TFP but rather about the specification of the production function for ideas.Models where ideas are non-rival often imply a tight connection between growth and the quantity of research. These models predict accelerating growth - whether of the linear kind or not - from an increasing number of researchers....I start my investigation with post-war US data. The empirical justification is that this is the most widely used and reliable data. The theoretical justification is that one might expect different TFP dynamics between countries at the frontier and countries catching up to the frontier. The main advantage of post-war US data, then, is that one can reasonably argue that the US was at the technological frontier during the entire period....My primary sources for TFP are Fernald (2012) (Fernald)and Bergeaud et al. (2016) (BCL).... Fernald’s series cover only the US business sector, while BCL include households and the government....The simplest way to start comparing model D and model G is to consider the following experiment. Suppose that two agents, George and Daniela, are asked in the middle of the sample (1983) to predict the level of TFP in the second half of the sample (1984- 2019). The agents have access to data from the end of World War 2 until 1983. The two agents have dogmatic beliefs regarding the correct model of economic growth. George believes in model G from equation (2) while Daniela believes in model D from equation (3). George therefore fits a log linear model over the years 1947: 1983 and predicts future (log) TFP as log Aˆ (G) t = ˆag + ˆgt for t = 1984: 2019. Daniela instead fits a linear model and predicts future TFP as Aˆ (D) t = ˆa + ˆbt. Figure 1 shows that Daniela would have made a much better forecast than George. George is puzzled by the TFP slowdown while Daniela does not perceive an obvious long term break in her model (although there are some meaningful medium term deviations).....Figure 1 reveals a new fact and makes an important empirical point. The new fact is that there is no TFP slowdown in the US according to model D. The important empirical point is that, with realistic values for TFP growth rates, the distinction between models D and G requires at least 10 years of out-of-sample forecasts...Fact 1. There is no TFP slowdown in the US according to model D....US growth is better described as additive rather than multiplicative. Instead of stating that the average growth rate of TFP is 1.45%, which is correct but not particularly useful, it is more relevant to say that TFP increases by 0.0245 points each year starting from a normalized value of 1 in 1947. For labor productivity, both the additive growth model and the multiplicative growth model predict an increasing size of productivity increments, but at different speeds. The additive model D predicts that labor productivity increments increase with the square of the time horizon, while the geometric model G predicts exponentially increasing increments. Model G does not describe the data with a constant growth rate. Model D describes the data relatively well with year-on-year increments of about $1560 per full time worker ($0.87 per hour, assuming 1800 hours worked in a year) around 2010...Fact 2. Postwar US TFP growth is well described by Model D with increments of ∆ = 0.0245 points each year starting from a normalized value of 1 in 1947. Model D also predicts the correct non-linear evolution of labor productivity.

Ed Comment: I've also wondered the same thing, although I think he may be right for the wrong reasons. I think we should expect innovation to grow harder to find as we fish out the pond. Our talent keeps carrying a disproportionate share of the weight, which means productive "research" talent might not be growing as fast as the global economy, at least not currently. And even though innovation can scale to a larger world, a larger world makes smaller breakthroughs more profitable. So innovators can profitably work on smaller breakthroughs, and therefore probably do. Those 2 dynamics might partially offset each other.

  • Productivity
    • Innovation/Research
    • Investment
  • Comparisons
    • Historical
  • GDP
    • Growth
Previous articleApril 21, 2022Additive GrowthTFP growth may be linear rather than exponential, challenging traditional growth models, according to @marginalrevolution. @tylercowen discusses Thomas Philippon’s research on TFP increments and its implications for economic analysis.Next articleApril 25, 2022The Demand For Protection and the Persistently High Rates of Gun Violence Among Young Black MalesYoung black males carry guns primarily for protection, creating a high-gun carry equilibrium that is difficult to reverse.
Showing 489 database articles primarily about either Productivity, Cronyism, Incentives/Risk-Taking, Innovation/Research, Institutional Capabilities, Intangibles, Investment, Startups, or Workforce Reorganization

How Much Revenue Does The AI Buildout Need In 2030?

AI Summary. The authors estimate AI capital spending of $560bn in 2026 and, in a high-investment case, $3.5tn of net AI capital in service by 2030, requiring roughly $1.3tn in annual infrastructure revenue once depreciation, operating costs and a 15% return are covered. That implies 7.4x growth from current annualized revenues, with downstream revenues of $1.9–2.6tn.

William Gildea and Azeem Azhar Exponential View
Date Posted:
October 1, 2026
Is Database:
Database

Beginning with capex projections, Gildea/Azhar derive for their high-growth case a $1.3T annual AI-infrastructure revenue hurdle for 2030. This covers $771B of depreciation and operating costs, plus a 15% return on $3.5T of net capital in service.

How much annual revenue must AI infrastructure generate to justify investment?

Core argument: In a high investment case with $3.5tn of net AI capital in service, the authors estimate AI infrastructure must generate $1.3tn of annual revenue by 2030, requiring 7.4x growth (59% CAGR) from today’s annualized revenues.

We estimate AI CapEx to be $560B in 2026, 64% of the total declared by the hyperscalers. Unfinished facilities can’t generate revenue, so the investment bill and the productive asset base will grow at different speeds. [In the high investment case], by 2030 we see $3.5T of net AI capital in service. The largest component [of the revenue hurdle] is the $555B in compute depreciation. We model lifespans at the current 5-6 years. Shell depreciation and OpEx combined contribute about a further $216B to the required revenue hurdle. [Adding a 15% return on net capital brings required annual infrastructure revenue to $1.3T]. Reaching the $1.3T hurdle would represent 7.4x growth (59% CAGR) from today’s annualized revenues. For its customers to earn 30-50% gross margins, downstream revenues need to be $1.9-2.6T. [Editor’s note: Van Nieuwerburgh’s far larger figure of $3.7T covers mature revenues from projects completed through 2032, using commissioning capital and a 50% infrastructure operating cash-flow margin. This estimate instead charges depreciation and operating costs plus 15% on net capital in service in 2030. Different horizons and cost conventions prevent a direct comparison. Van Nieuwerburgh also has a much higher capex estimate.]

Takeaways by Macro Roundup® AI

  1. In a high investment case with $3.5tn of net AI capital in service, the authors estimate AI infrastructure must generate $1.3tn of annual revenue by 2030, requiring 7.4x growth (59% CAGR) from today’s annualized revenues.
  2. Compute depreciation of $555bn, modeled on 5-6 year lifespans, is the largest component of the 2030 revenue hurdle, with shell depreciation and operating expenses adding about $216bn and a 15% return on net capital completing the $1.3tn total.

Related Articles:

  • Financing the AI Buildout — The authors estimate roughly 57 gigawatts of operating US data center capacity against a planned development pipeline of about 509 gigawatts, which is not a completion forecast since projects may be delayed, scaled back, or abandoned. Their central scenario has 182.8 gigawatts of added capacity becoming operational through 2032, 117.2 gigawatts completed later, and 226.9 gigawatts never completed.
  • What Investment Data Implies about the AI Transition — The five largest U.S. technology firms are scaling AI capital spending about 50% a year, from $155bn to a forecast $755bn. Embedding this in a two-sector model with rare productivity booms, the authors estimate AI adds roughly 5, 20, or 58pp to cumulative growth over a seven-year transition, depending on scenario.
  • Rear Window — Major cloud providers posted annual revenue growth of 37% at Amazon Web Services, 43% at Microsoft Azure and 82% at Google Cloud, with rising revenue backlogs of $514bn and $496bn respectively at Google Cloud and Amazon Web Services. Earnings growth appears highly contingent on continued hyperscaler capital spending and research, which rose from $460bn to $870bn.
  • Investment
  • GDP
    • Financial Markets
  • Productivity
    • Innovation/Research

AI and Entrepreneurship: What is Really Happening?

AI Summary. Entrepreneurship by businesses with employees is flat or declining, including in AI-intensive information and professional services, where establishment entry has been flat or falling and young-firm employment in AI-exposed industries is falling. Applications for likely solo businesses with no employees rose steeply in those AI-intensive sectors, but self-employment as a main job is flat, suggesting side hustles.

Nathan Goldschlag Economic Innovation Group
Date Posted:
September 30, 2026
Is Database:
Database

Nathan Goldschlag finds that available federal data do not yet establish that AI is boosting entrepreneurship. “Across different cuts of the data, there is no clear evidence of AI affecting entrepreneurship, either for likely employers or nonemployers.”

Is AI driving a boom in new employer businesses?

Core argument: Business applications likely to become employer businesses were flat in 2025 and began rising in 2026, with fewer applications of the kind having the highest chance of becoming an employer business.

Employer entrepreneurship is at best rising modestly, and at worst has been falling for several years already. The number of business applications likely to become an employer business was flat in 2025 and began rising in 2026. Fewer of those applications have been the kind that have the highest chance of becoming an employer. Nonemployer entrepreneurship, or “solopreneurship,” is likely rising, but not as the main job of the solopreneurs. These are probably side hustles. Likely nonemployer business applications rose significantly in 2025 and early 2026. But the share of workers claiming to be self-employed nonemployers in their main job — in other words, business owners with no employees — is flat (though noisy). AI-intensive sectors and industries are no exception. Establishment entry in AI-intensive sectors (information and professional services) has been flat or falling in recent years.

Takeaways by Macro Roundup® AI

  1. Business applications likely to become employer businesses were flat in 2025 and began rising in 2026, with fewer applications of the kind having the highest chance of becoming an employer business.
  2. Likely nonemployer business applications rose significantly in 2025 and early 2026, going vertical in the most AI-intensive sectors of information and professional services, while other sectors kept pace until early 2026 and then flattened.
  3. The share of workers reporting self-employment as nonemployers in their main job is flat, though noisy, including among workers in AI-exposed occupations in 2025 and early 2026.

Related Articles:

  • The Age Of The Solopreneur — A surge in US business formation is being driven by solo entrepreneurs, with growth in AI tool usage and in solopreneur activity in high-AI-adoption sectors suggesting artificial intelligence accounts for a meaningful portion of the increase. The authors argue AI is lowering barriers to starting and growing a business by expanding what one-person firms can do.
  • America Has Become An Entrepreneur’s Paradise — US growth in new-business applications is concentrated in professional services (up 25% over four years), retail (18%), and health care and social assistance (18%) rather than artificial-intelligence startups. The share of applications the Census Bureau deems likely to hire at least one employee has fallen to 30% from 38%.
  • Which Entrepreneurs Boost Productivity? — The authors find that a minority of entrepreneurs are "transformative" — generating disproportionate productivity gains, scoring high on IQ tests, being well-educated, and hiring research and development workers. They argue that economies with more such entrepreneurs and R&D workers sustain higher long-run productivity growth.
  • Startups
  • Productivity
    • Innovation/Research
    • Investment

Tech's Trillion-Dollar Internal Inconsistency

AI Summary. Wall Street analysts covering technology project the sector's operating cash flow will more than double to roughly $2.4tn by 2028, a gain of over $1.2tn, while analysts covering the rest of the S&P 500 — technology's customers — project those firms will add far less cash flow. These sector-by-sector forecasts are internally inconsistent.

Torsten Sløk Apollo
Date Posted:
September 29, 2026
Is Database:
Database

Tech analysts expect sector operating cash flow to more than double to ~$2.4T by 2028. Analysts covering other S&P 500 sectors (tech’s customers) see far less cash growth in their sectors. Slok “raises the question of who exactly will be writing all those checks to buy AI services.”

Are tech cash flow forecasts inconsistent with customers' projected growth?

Core argument: Analysts covering the tech sector expect its operating cash flow to more than double to roughly $2.4tn by 2028, an increase of over $1.2tn.

Wall Street equity analysts work in sector silos, and when you add up their forecasts, the numbers are internally inconsistent. The analysts covering tech expect the sector's operating cash flow to more than double to roughly $2.4 trillion by 2028, an increase of over $1.2 trillion. Meanwhile, the analysts covering the other sectors in the S&P 500, which are tech's customers, expect those companies to add much less operating cash flow. In other words, the tech silo is betting on a future in which demand for AI and tech services explodes, while the silos covering the companies that would pay for those services see a much more modest outlook. Both cannot be right at the same time. The bottom line is that either tech's customers will generate a lot more cash than their analysts expect, or tech's cash flow forecasts are too optimistic, which raises the question of who exactly will be writing all those checks to buy AI services.

Takeaways by Macro Roundup® AI

  1. Analysts covering the tech sector expect its operating cash flow to more than double to roughly $2.4tn by 2028, an increase of over $1.2tn.
  2. Analysts covering the other S&P 500 sectors, which are tech's customers, expect those companies to add much less operating cash flow, leaving the combined forecasts internally inconsistent.
  3. Either tech's customers will generate much more cash than their analysts expect, or tech's cash flow forecasts are too optimistic, which raises the question of who will pay for AI services.

Related Articles:

  • A Catalyst For The AI Bubble Break — Historically, controlling for valuations, a 1% rise in the share of the market represented by initial public offerings has been associated with roughly a 4% decline in prices. With large artificial-intelligence company listings expected and share issuance exceeding buybacks, equity supply could shift from shrinking about 1% a year to growing near 5%, implying returns roughly 20% below average.
  • Financing the AI Buildout — The authors estimate roughly 57 gigawatts of operating US data center capacity against a planned development pipeline of about 509 gigawatts, which is not a completion forecast since projects may be delayed, scaled back, or abandoned. Their central scenario has 182.8 gigawatts of added capacity becoming operational through 2032, 117.2 gigawatts completed later, and 226.9 gigawatts never completed.
  • Rear Window — Major cloud providers posted annual revenue growth of 37% at Amazon Web Services, 43% at Microsoft Azure and 82% at Google Cloud, with rising revenue backlogs of $514bn and $496bn respectively at Google Cloud and Amazon Web Services. Earnings growth appears highly contingent on continued hyperscaler capital spending and research, which rose from $460bn to $870bn.
  • Investment
  • GDP
    • Financial Markets
  • Productivity
    • Innovation/Research

Nine Percent of GDP

AI Summary. An analysis estimates that for US data center owners to break even on AI investments, the sector would need about $3.725tn in annual compute revenue by 2032 — roughly 9.2% of projected 2032 GDP. The estimate assumes 183 GW of US capacity completed, a $9.61tn capital base, a 10% discount rate, and a 50% operating cash flow margin.

Hanno Lustig The Two Cents
Date Posted:
September 28, 2026
Is Database:
Database

The US AI-buildout is projected to average ~3.6% of GDP over 2025–32. Lustig notes data-center operators will need ~$3.725T in annual compute revenue by 2032, 9.2% of projected GDP, to earn a 10% unlevered return on the buildout.

How much annual revenue must AI data centers generate to break even?

Core argument: Stijn’s baseline estimate holds that data center owners would need $3.725 trillion of annual revenue by 2032 — roughly 9.2% of projected 2032 GDP — to break even on AI investment at a 10% discount rate.

What do you have to believe about future revenue in order for all data center owners to to break even on their AI investment? Using a 10% discount rate, Stijn’s baseline number is 3.725 trillion of annual revenue by 2032, which would amount to roughly 9.2% of projected 2032 GDP. This number is the top line earned from selling compute in aggregate by whoever operates the 182.7 GW of US capacity completed by 2032.2. The assumptions behind that number: 183 GW of U.S. data-center capacity completed between 2025 and 2032. $8.54 trillion of construction cost, grossed up to a $9.61 trillion capital base to account for the return on capital tied up during construction. A 10% discount rate. A 6-year life for IT equipment (68% of cost) and a 20-year life for everything else (32%). A 50% operating cash flow margin.

Takeaways by Macro Roundup® AI

  1. Stijn’s baseline estimate holds that data center owners would need $3.725 trillion of annual revenue by 2032 — roughly 9.2% of projected 2032 GDP — to break even on AI investment at a 10% discount rate.
  2. The break-even calculation assumes 183 GW of U.S. data-center capacity completed between 2025 and 2032 at $8.54 trillion of construction cost, grossed up to a $9.61 trillion capital base for return on capital tied up during construction.
  3. The estimate assumes a 6-year life for IT equipment, which accounts for 68% of cost, a 20-year life for the remaining 32%, and a 50% operating cash flow margin.

Related Articles:

  • Financing the AI Buildout — The authors estimate roughly 57 gigawatts of operating US data center capacity against a planned development pipeline of about 509 gigawatts, which is not a completion forecast since projects may be delayed, scaled back, or abandoned. Their central scenario has 182.8 gigawatts of added capacity becoming operational through 2032, 117.2 gigawatts completed later, and 226.9 gigawatts never completed.
  • A Catalyst For The AI Bubble Break — Historically, controlling for valuations, a 1% rise in the share of the market represented by initial public offerings has been associated with roughly a 4% decline in prices. With large artificial-intelligence company listings expected and share issuance exceeding buybacks, equity supply could shift from shrinking about 1% a year to growing near 5%, implying returns roughly 20% below average.
  • Rear Window — Major cloud providers posted annual revenue growth of 37% at Amazon Web Services, 43% at Microsoft Azure and 82% at Google Cloud, with rising revenue backlogs of $514bn and $496bn respectively at Google Cloud and Amazon Web Services. Earnings growth appears highly contingent on continued hyperscaler capital spending and research, which rose from $460bn to $870bn.
  • Investment
  • GDP
    • Financial Markets
  • Productivity
    • Innovation/Research

Financing the AI Buildout

AI Summary. The authors estimate roughly 57 gigawatts of operating US data center capacity against a planned development pipeline of about 509 gigawatts, which is not a completion forecast since projects may be delayed, scaled back, or abandoned. Their central scenario has 182.8 gigawatts of added capacity becoming operational through 2032, 117.2 gigawatts completed later, and 226.9 gigawatts never completed.

Stijn Van Nieuwerburgh Brookings Papers on Economic Activity
Date Posted:
September 24, 2026
Is Database:
Database
Is Important:
Important

Stijn Van Nieuwerburgh projects ~$10.3T will be spent on the AI buildout over 2025–2032, averaging 3.63% of GDP. He estimates 2/3 of that spending reflects IT equipment and one-third real estate and associated power infrastructure.

How much of the planned data center pipeline gets built?

Core argument: Using Cleanview project-level data from July 2026, the authors estimate roughly 57 GW of operating U.S. data center capacity against a planned development pipeline of roughly 509 GW, which they stress is not a completion forecast.

The required investment is enormous. A representative 200 MW AI training campus costs roughly $8.2 billion, about two-thirds of which reflects IT equipment and one-third the real estate and associated power infrastructure. We estimate that 183 GW is completed by 2032 with a further 118 GW completed after 2032. This pipeline will trigger about $10.3 trillion dollars of investment over 2025–2032. At an average of 3.63% of GDP per year, the projected buildout would be larger relative to the economy than the major U.S. canal, railroad, electrification, highway, and telecommunications investment booms. It would double the electricity consumption of the entire U.S. residential sector.

Takeaways by Macro Roundup® AI

  1. Using Cleanview project-level data from July 2026, the authors estimate roughly 57 GW of operating U.S. data center capacity against a planned development pipeline of roughly 509 GW, which they stress is not a completion forecast.
  2. The authors’ central scenario allocates the announced pipeline so that 182.8 GW of additional U.S. capacity becomes operational during 2025–32, including 19.0 GW tied to projects already operational in 2025 or 2026.
  3. The authors’ scenario has 117.2 GW of planned data center capacity completed after 2032 and 226.9 GW never completed, applying lower realization rates to more distant and less fully documented projects.

Related Articles:

  • Rear Window — Major cloud providers posted annual revenue growth of 37% at Amazon Web Services, 43% at Microsoft Azure and 82% at Google Cloud, with rising revenue backlogs of $514bn and $496bn respectively at Google Cloud and Amazon Web Services. Earnings growth appears highly contingent on continued hyperscaler capital spending and research, which rose from $460bn to $870bn.
  • AI Set to be Largest CapEx Cycle Ever … and Soon Majority Externally Financed — Hyperscaler and data-center investment is tracking toward $1.5tn annually by 2030, which in real terms would exceed the 2005-06 housing boom, the 1990s fiber peak, and the 1882 railroad peak combined. External debt and equity are projected to fund close to 90% of the buildout, making it dependent on credit markets.
  • The Summer I Turned Pretty — A warning sign in a boom cycle is when companies closest to final demand weaken while capital spending beneficiaries keep thriving, as when telecom operators' shares rolled over while communications equipment stocks kept rising. Semiconductor stock prices and free cash flow are soaring while large cloud providers' shares stagnate and their free cash flow plummets.
  • Investment
  • GDP
    • Financial Markets
    • Growth
  • Productivity
    • Innovation/Research

Moonshot Capitalism: AI Rewrites The Venture Capital Playbook

AI Summary. Global investment in "deep tech" — companies whose products rest on major scientific or engineering advances — has exceeded $150bn since the start of 2024, more than the $133bn invested in the decade through 2019, excluding sums poured into AI start-ups. Failed battery and electric-vehicle bets from an earlier peak illustrate the risks of such moonshot dealmaking.

Tim Bradshaw Financial Times
Date Posted:
September 10, 2026
Is Database:
Database

Since the start of 2024, more than $150B of venture capital has been invested into non-AI “deep tech” firms whose products are rooted in significant engineering advances, exceeding the $133B invested in such firms btw 2010 and 2019.

Is the AI boom pushing venture capital toward riskier moonshot bets?

Core argument: Global "deep tech" investment excluding AI start-ups has exceeded $150bn since the start of 2024, more than the $133bn invested in the entire decade through 2019, according to Dealroom.

The AI boom is fuelling a resurgence in ambitious “moonshot” bets, as early SpaceX backers’ huge returns and falling valuations for traditional software companies force tech investors to embrace riskier and more capital-intensive dealmaking. Excluding the giant sums ploughed into AI start-ups, global investment in “deep tech” — companies whose products are rooted in big scientific or engineering advances — has exceeded $150bn since the start of 2024, more than the $133bn in the entire decade to the end of 2019, according to Dealroom. This year’s deep-tech investments have not yet surpassed 2021’s peak, which was propelled by battery and electric vehicle deals for the likes of Rivian and Northvolt — many of which turned sour, highlighting the risks involved in moonshot dealmaking.

Takeaways by Macro Roundup® AI

  1. Global "deep tech" investment excluding AI start-ups has exceeded $150bn since the start of 2024, more than the $133bn invested in the entire decade through 2019, according to Dealroom.
  2. Huge returns for early SpaceX backers and falling valuations for traditional software companies are pushing tech investors toward riskier, more capital-intensive "moonshot" dealmaking.
  3. Deep-tech investment has not yet surpassed the 2021 peak, which was propelled by battery and electric vehicle deals for companies such as Rivian and Northvolt, many of which turned sour.

Related Articles:

  • Capital Is Making a Comeback — Tangible investment in property, factories and equipment fell from 12.5% to 8.5% of private gross domestic product, while intangible investment in intellectual property, software and process knowledge rose from about 11.5% to 16.75%. The author argues demand for tangible capital investment will now have to rise.
  • Public to Private Equity in the United States: A Long-Term Look — An analysis of more than 31,000 global venture capital deals finds 62% lost money and over half lost 50–100% of invested capital, though the distribution of returns has much fatter tails than buyouts or public equities. Venture funds averaged a public market equivalent ratio of about 1.4, indicating returns above public markets.
  • Gross and Net US Investment — Net US investment has fallen from roughly 40% of gross investment in the 1970s to about 25% in the past decade, meaning about three-quarters of gross investment now just replaces depreciating capital. The author attributes this gap to modern investment being more information-technology-related, which depreciates faster and requires more frequent replacement.
  • Investment
  • GDP
    • Financial Markets
  • Productivity
    • Innovation/Research
© Copyright 2026 Coherent Research Institute · All Rights Reserved · Privacy · Terms