Episode summary
AI Spending: A New Engine for the Global Economy
Thoughts on the Market (Morgan Stanley)
· · 13 min
Summary
AI-related capital spending is increasingly driving the global economic outlook, with the US acting as the main demand engine. The host says Morgan Stanley has raised its estimate for US hyperscaler and AI capex to roughly $1.2 trillion to $1.3 trillion in 2027 and as high as $1.4 trillion in 2028, though much of that spending is imported equipment, so the direct GDP impulse is smaller than the headline suggests. The guest says AI capex is still adding around 40 basis points to US growth this year, with a similar contribution possible next year.
Asia is the clearest external beneficiary. The guest says semiconductor exports from the region are booming, with growth of 90%, and that Korea, Taiwan, and Japan are the biggest winners from US AI-related demand. But the panel argues the Asian investment story is broader than AI alone, combining AI and semiconductors with energy, defense, and supply-chain onshoring. On the panel’s estimate, AI and semiconductor capex in Asia is about $380 billion in 2026, versus $900 billion in energy capex.
Europe, by contrast, remains much weaker on investment. The guest says Europe’s economy is more consumption-driven, AI plans are far smaller than in the US, and fiscal policy faces aging, defense, and interest-cost pressures. The panel also argues the AI cycle is likely to last 3 to 4 more years, with broader productivity gains still limited outside high-tech sectors.
Key takeaways
- The guest says US AI and hyperscaler capex has been revised up to about $1.2 trillion to $1.3 trillion in 2027, with as much as $1.4 trillion in 2028.
- The guest estimates AI capex is contributing around 40 basis points to US growth this year, but much of the spending leaks into imports.
- The guest says Asia’s semiconductor exports are growing 90%, with Korea, Taiwan, and Japan the biggest beneficiaries of US AI demand.
- The guest argues Asia’s capex boom is broader than AI, with energy capex at about $900 billion versus $380 billion for AI and semiconductors in 2026.
- The guest says Europe’s AI investment plans are roughly a factor of 20 below the US, and fiscal pressures are tightening.
- The guest expects the AI capex cycle to last 3 to 4 more years before broader productivity effects spread beyond high-tech sectors.
Notable quotes
“we continue to revise higher our estimates for hyperscaler and AI related capex in the US economy”
“there is a capex and industrial super cycle that is underway in Asia”
“we have the visibility for this cycle to be lasting for 3 four more years”
How the episode opens
Welcome to Thoughts on the Market. I'm Seth Carpenter, Morgan Stanley's global chief economist and head of macro research. And I'm Michael Gapen, chief US economist. And I'm Chetanaya, chief Asia economist. — And I'm Yens Eisenmid, chief Europe economist. — And today is going to be our third quarter economic roundt taking a wide-angle view on the global economy and all the key forces shaping our outlook and the economy. It's Monday, July 20th at 10 a.m. in New York
And 400 p.m. in Frankfurt — And 10 p.m. in Hong Kong.
Since our last round table in April, the global economy has continued to face all sorts of shocks, a mix of resilience and friction. Inflation pressures have not disappeared. Energy and geopolitical risks have come up.
They've receded. They've come back. They've receded all over the place.
But there is one underlying source of momentum that we have to talk about and that is the AIdriven capex cycle. Michael, let me turn to you because the US is a real focal point of all of this. Tell me a little bit about where Morgan Stanley Research is thinking about hyperscaler capex, how big it is and then for you when you think about the US economy, just how big of a driver is it for what we're looking for in the US?
Yeah, we continue to revise higher our estimates for hyperscaler and AI related capex in the US economy. Uh we we were thinking a little over a trillion for 2027. Now we're more like 1.2 1.3 trillion, maybe as high as 1.4 trillion in 2028.
So the level of hyperscaler spending continues to keep rising. the growth rate and its effect on the economy is likely to slow, but as you noted, it's still a major driver of momentum in the US.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- ai spending
- global economy
- economic outlook
- investment momentum
- technology capex
Watch the episode
Watch “AI Spending: A New Engine for the Global Economy” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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