Myung J. Chun / Los Angeles Times via Getty ImagesTorsten Sløk compared the current AI buildout to the housing market boom of the 2000s. The economist says steady increase in AI capex as a percent of GDP has outpaced housing's contribution at the peak. The magnitude of the increase is also a risk if the AI boom unwinds, Sløk says. The AI buildout is running at a rate that outpaces other major investment cycles, including the housing boom of the 2000s, Apollo's chief economist says. According to Torsten Sløk, AI's contribution to US GDP is growing faster than both the telecom buildout of the dot-com era and the housing market during its years of expansion leading up to 2008. "The AI cycle is building at close to twice the pace of the housing boom at its fastest," Sløk wrote on Apollo's The Daily Spark blog. "The data-center buildout is smaller than housing in level but larger in the change in share of GDP, and faster than either previous cycle."AI infrastructure and data center construction has boomed since the debut of ChatGPT at the end of 2022, spurring huge growth for tech stocks, but increasingly fueling concerns about an investment bubble. Sløk highlighted charts breaking down AI spending's contribution to the broader economy and comparing it to the pre-crisis housing market. The Daily Spark/Apollo Global CapitalWhile the AI buildout is still smaller than the housing boom as a total percentage of GDP, it's growing at a faster rate than the residential real estate market did from 1996 to 2008. It's also eclipsed the telecom buildout of the late 1990s and early 2000s.The Daily Spark/Apollo Global CapitalSløk's comparisons come with a warning, particularly in the context of the pre-2008 housing market. Essentially, as high as AI goes, that's as far as it can fall, and he notes that the sharp drawdown in home values exacerbated the financial crisis that followed in the wake of the collapse. "The same arithmetic runs in reverse: housing's unwind, from 6.2% of GDP in early 2006 to 3.0% by the end of 2008, is what made that recession severe, while telecom's much smaller reversal produced the mildest one."His analysis was flagged on Thursday by famed contrarian investor, Michael Burry, a veteran of the 2008 housing blowup. Burry, who has also been ringing alarms about the risks of an AI bubble, highlighted Sløk's commentary about the risk of a reversal of economic fortunes if AI demand turns out to be lower than expected. "A cycle that builds at 0.85 percentage points a year can unwind at a similar pace, and that, rather than the buildout itself, is the macro risk if AI demand disappoints," Sløk said. Read the original article on Business Insider
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