A Big Tech Arms Race Is Fueling the AI Boom. Are Productivity Gains or Business Efficiencies in Sight?

Artificial intelligence is driving a bull market in stocks, a win for investors. For economists, however, the payoff will be measured longer-term, depending on how billions of dollars of technology investments filter down in terms of productivity and business efficiency.

If they pan out, AI could prove to be more consequential than previous technology waves, and Big Techs are banking on it. Microsoft has invested some $13 billion in OpenAI, establishing a close partnership with the creator of ChatGPT. Amazon has put $4 billion into another generative AI (GenAI) leader, Anthropic. Google parent Alphabet and Facebook parent Meta have signaled their intentions with tens of billions each in planned capital expenditures.

Goldman Sachs Economics Research last year projected total investments as high as $100 billion in the U.S. and $200 billion globally by 2025. These are seen as prerequisites for reshaping business processes and producing major productivity gains, though “the near-term GDP impact is likely to be fairly modest given that AI-related investment currently accounts for a very low share of U.S. and global GDP,” said...