A large portion of GDP growth is accounted for (in a mechanical sense) by capital investment related to AI. What are the prospects for continued spending momentum from this sector, given recent developments in markets?
First, here’s a picture of computer equipoment capital investment over time, as a nominal share of GDP and log ratio of real quantities.
Figure 1: Ratio of nominal investment in computer equipment to nominal GDP (blue, left scale), and Log ratio of real investment in computer equipment to real GDP (tan, right scale). NBER defined peak-to-trough recession dates shaded gray. Source: BEA via FRED, NBER, and author’s calculations.
There’s been a jump of 0.3 percentage point share of GDP since mid-2023. This data only goes through 2025Q2, given delayed release of NIPA data. Here’s some speculation on overall nonresidential investment:
Figure 2: Nonresidential fixed investment (bold black), GDPNow nowcast of 11/21 (light blue square), Survey of Professional Forecasters median (tan), real nonresidential fixed investment minus real computer equipment investment (teal), all in bn.Ch.2017$ SAAR. ex-computer investment series calculated using simple subtraction. Source: BEA, Atlanta Fed, Philadelphia Fed, and author’s calculations.
Overall nonresidential investment growth is nowcasted to have slowed in Q3, and forecasted to slow further going into Q4.
Can we infer anything from stock prices? In 2000, the Nasdaq peaked on March 30. IT investment plateaued in that period, according to Doms (2004).
Source: Doms (2004). Red arrow at Nasdaq peak (edit by author).
In other words, IT spending essentially maxed out at Nasdaq peak, and stayed at that level for another couple quarters.
The Mag-7 index hit a local peak near end-October. Assuming no resumption of rise in the index (and the present repeats the past), then real computer equipment investment is likely to have hit a plateau as well. To the extent that growing investment adds to growth (in an accounting sense), a plateau in investment suggests (holding all else constant) slowing growth.
Source: CNBCaccessed 25 Nov 2025.
Of course, a sustained resumption of Mag-7 price rise would force a big revision in this view.
Industry views suggest that even with a correction in technology-related stock prices, the inertia in AI related spending will sustain investment (equipment, construction, software) for some time (years?) to come.
