{"id":488722,"date":"2025-10-10T16:05:14","date_gmt":"2025-10-10T16:05:14","guid":{"rendered":"https:\/\/www.europesays.com\/uk\/488722\/"},"modified":"2025-10-10T16:05:14","modified_gmt":"2025-10-10T16:05:14","slug":"the-bull-market-is-turning-3-years-old-and-top-analysts-are-wondering-is-ai-actually-good-for-economic-growth","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/uk\/488722\/","title":{"rendered":"The bull market is turning 3 years old and top analysts are wondering, is AI actually good for economic growth?"},"content":{"rendered":"

The bull market just celebrated its third anniversary and top analysts on Wall Street are beginning to voice the previously unthinkable: is artificial intelligence (AI), the dynamo powering the great rally, actually kind of bad for economic growth? The consensus holds that AI will inevitably deliver large productivity gains and that\u2019s powered deals worth hundreds of billions of dollars into a throwback, 19th-century style (or late 1990s-style) infrastructure boom. This has led to fears of bubble formation, with even Jeff Bezos saying recently it\u2019s \u201ckind of an infrastructure bubble<\/a>,\u201d not one purely driven by financial speculation, and it will pay off for years, even generations. <\/p>\n

\u201cIt seems you can\u2019t go anywhere without talking about AI,\u201d according to Aditya Bhave, senior U.S. economist at Bank of America<\/a> Research, whose team tackled the subject on Friday. \u201cAI: it\u2019s what everyone is talking about,\u201d they said.<\/p>\n

In BofA\u2019s client discussions, according to Bhave\u2019s team, \u201cone of the most frequently discussed topics is AI and what it means for growth, productivity, and the labor market.\u201d They concluded that they have not found evidence of AI usage leading to job losses, especially across white-collar occupations. \u201cThe productivity story seems to be winning, at least so far.\u201d Morgan Stanley<\/a> Wealth Management\u2019s Lisa Shalett and UBS\u2019s Paul Donovan aren\u2019t so sure.<\/p>\n

Lisa Shalett, chief investment officer for MS Wealth Management, previously told Fortune<\/a> she was \u201cvery concerned\u201d about bubbly conditions around AI, and reiterated in an October 1 research note that the rally is in its \u201cseventh inning<\/a>.\u201d Morgan Stanley\u2019s Global Investment Committee flagged three concerns on their mind as the ballgame nears its end: challenges in free cash flow growth among the so-called \u201chyperscalers,\u201d speculative deal-making and, finally, \u201cslowing growth in key revenue segments.\u201d<\/p>\n

Paul Donovan, global chief economist for UBS Wealth Management, wrote on Friday that a simple question is haunting markets: \u201cIs AI hurting growth<\/a>?\u201d He noted \u201cthe exuberance\u201d around it, which \u201cshould be based on an expectation that investing today will generate higher economic output in the future,\u201d and in that sense, AI is surely good for long-term growth. The problem, in other words, is closer to home, in those last two innings Shalett has been worrying about.<\/p>\n

Growing debate among experts<\/p>\n

Donovan\u2019s analysis includes boosts to growth from the now-archetypal data center leading to economic activity from construction workers, programmers and so forth, which have helped lift U.S. growth. \u201cBut AI potentially lowers current growth by diverting resources,\u201d he said. For example, he cited research by Bloomberg showing that as regional electricity prices are pushed higher by the power needs of data centers, the spiking bill for consumers results in less money to spend elsewhere in the economy. Likewise, energy-intensive businesses will face higher costs, too. This risks \u201ccreating a gap in the economic growth story,\u201d Donovan said, because this dynamic could force some currently economically productive businesses to close. In other words, does the local small business have to die so the data center can live?<\/p>\n

Morgan Stanley\u2019s Shalett flags a different concern, that even the supposedly dynamic new AI-based businesses just aren\u2019t growing so fast right now. She blames \u201cmarket saturation or monopolies\u2014as seen in search and digital advertising\u2014and increasing competition,\u201d citing cloud services, where new entrants are competing on price in a battle for market share.\u00a0She\u2019s also worried about huge amounts of venture capital flocking to fledgling business models, and advised investors to rethink their exposure to small-cap and unprofitable tech firms.\u200b<\/p>\n

Bhave\u2019s team is generally more bullish. While allowing that risks aren\u2019t off the table in the medium term, they argue that for now at least, AI appears to be a \u201cnet positive\u201d for growth. Just look at the GDP figures from the first half, which surprised even BofA\u2019s relatively optimistic expectations. The rebound to an annualized rate of 1.6% is \u201cparticularly resilient considering the missing imports problem\u201d in the first quarter due to the Trump tariff shock, which \u201cblurs the picture\u201d a bit. Investment in AI is just a huge force driving the economy forward, they say.<\/p>\n

\"\"<\/p>\n

Bhave\u2019s team cited senior analyst Vivek Arya, who covers the semiconductors sector, and his bullish call that despite concerns about the medium term, capex spending will still power GDP growth. Arya previously told Fortune in an interview that he thinks jitters have to do with this particular time of year, the fourth quarter crunch as most businesses start thinking about what\u2019s around the bend. Economist Owen Lamont calls it \u201cpanic season<\/a>\u201d in markets and Shalett herself noted the S&P 500 has recently managed to defy the \u201cSeptember curse\u201d of historically poor performance, delivering a nearly 3% gain.<\/p>\n

Arya told Fortune that BofA has seen \u201cin prior years right around this time \u2026 people get justifiably very nervous about what is going to be the amount of spending next year.\u201d In the start of 2025, he added, clients expected cloud capex to only grow about 20% or so, but thats been blown out of the water with 50%-60% growth instead<\/a>. \u201cBut now it\u2019s the worry again for next year and the year beyond that.\u201d<\/p>\n

Another voice is former Obama administration economist Jason Furman, on the faculty at Harvard, who calculated in late September that without data centers, those GDP figures would look a bit different. Subtracting all that capex results in a growth of just 0.1% on an annualized basis for the first half of 2025. To Donovan\u2019s point, some other productive activities would have taken its place, Furman added: \u201cAbsent the AI boom we would probably have lower interest rates [and] electricity prices, thus some additional growth in other sectors. In very rough terms that could maybe make up about half of what we got from the AI boom.\u201d Still, the question of AI and growth isn\u2019t a straightforward one.<\/p>\n

Fortune Global Forum<\/strong> returns Oct. 26\u201327, 2025 in Riyadh. CEOs and global leaders will gather for a dynamic, invitation-only event shaping the future of business. Apply for an invitation.<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"The bull market just celebrated its third anniversary and top analysts on Wall Street are beginning to voice…\n","protected":false},"author":2,"featured_media":488723,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3091],"tags":[1942,51,3448,2441,16,15],"class_list":{"0":"post-488722","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-markets","8":"tag-artificial-intelligence","9":"tag-business","10":"tag-gdp","11":"tag-markets","12":"tag-uk","13":"tag-united-kingdom"},"share_on_mastodon":{"url":"","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/488722","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/comments?post=488722"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/488722\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media\/488723"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media?parent=488722"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/categories?post=488722"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/tags?post=488722"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}