Paul Krugman (Substack)

Forget that. How about the capital being employed? There better be something new. I mean, we’re talking now for the just a top handful of companies doing $300 to $500 billion in capex [capital expenditures] annually. I mean, AI isn’t like the internet, which made things more capital efficient and raised returns on capital.

So far, AI is doing the opposite. It is a massively capital-intensive business. Someone joked that the top tech companies are now looking like the oil frackers did in 2014, 2015, where more and more capital is chasing arguably a variable return.

Translation: these days tech companies are spending hundreds of billions of dollars a year on equipment and buildings (the capex he’s talking about), so it’s not like the internet boom, which didn’t involve large-scale spending. And he’s doubtful about whether future returns will justify the current levels of AI spending.