Azeem Azhar

A key gauge is the investment intensities.

So what is the scale of capital expenditure relative to GDP?

And is that getting unhinged?

When one sector attracts an enormous amount of capital, it bends the entire economy.

Capital moves there, labour moves there, supply chains move there.

And one problem is that any kind of reversal transmits quickly.

If assets are short-lived, that can really compress the payback window.

If we look historically...

The US build-out of the railways in the 19th century had a number of bubbles, and at one point, the annual capital expenditure in building that railway network and the trains approached 3.6% of GDP, right before one of the busts.

In the late 1990s, investment in telecoms infrastructure as we started to digitize telecoms and communications reached about 1% of US GDP level.

And it left behind many, many conduits of dark fiber that we still use today.

When we look at artificial intelligence in 2025, we're going to see about $400 billion go into build-out data centers.

Not all of that is in the US, but roughly speaking, given the majority is, that's about 1% of US GDP.

And it seems to be rising.

Maybe it'll get towards 1.5% by 2030.

Now, hardware like GPUs doesn't have the same lifespan as iron rails on a railway.

They depreciate over six years.

They can get used in their really high intensity uses for about three years before they have to do gentler tasks, shall we say.

At the same time, American GDP growth is becoming noticeably dependent on these investments in data centers.

So where does this gauge lie?