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AMERICA'S AI SPLURGE HITS A GDP GLITCH

Berenberg strategists warn that massive investments in AI alone won't sustain rapid U.S. economic growth unless the country ramps up domestic production of the hardware needed to power it.

"U.S. hyperscalers now spend most of their vast AI capex on imported hardware, generating little or no net positive impact on U.S. GDP," Berenberg said in a note to clients on Wednesday.

The spike in imports of AI-related hardware has outpaced the rise in tech investments since 2024, effectively offsetting the contribution of that investment to GDP growth over the past year or so, the brokerage said, citing U.S. international trade data.

This reliance on imported hardware comes at a time when there is a clear shift in focus from software to hardware in the race to dominate the technology.

Berenberg said with investments in tech largely offset by the cost of imported hardware, the U.S. will need to find other sources of growth to sustain a stronger pace of expansion than other advanced economies, a task it expects to be difficult.

While the AI investment boom is not materially supporting economic growth in the U.S., Berenberg expects its widespread adoption to provide a major tailwind to productivity gains across economies going forward.

(Kanchana Chakravarty)

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