Artificial intelligence is shaping up as a bigger driver of the US economy than consumer spending, according to Nasdaq Chief Economist Phil Mackintosh, who says the extraordinary wave of investment in AI is reshaping both economic growth and financial markets.
Speaking during a Betashares webinar this week, Mackintosh said investment in data centres, chips and electricity generation was filling the gap left by slowing consumer spending, while supporting growth across the world’s largest economy.
“We’ve kind of pivoted away from the consumer being the real driver of growth in the US economy,” Mackintosh said. “The consumer has been slowing in the US. What’s been replacing it though is all the build-out of AI.”
The Manhattan-sized buildout
Much of the market’s attention has focused on Nvidia, OpenAI and the race to build increasingly powerful AI models. Mackintosh argues the bigger story is unfolding outside Silicon Valley, where the infrastructure needed to power AI is becoming an economic story in its own right.
Across the US, data centres are being built at a remarkable pace. To illustrate the scale, Mackintosh compared one project to the size of Manhattan.
“For anyone that’s been to Manhattan, it’s pretty big,” he said. “That’s about 100 blocks long and about five avenues wide.”
Facilities of that size require vast amounts of semiconductors, memory chips, copper, electricity and cooling infrastructure, creating demand well beyond the technology sector. The scale of that investment is also reshaping where investors are looking for opportunities.
AI trade broadens beyond the Magnificent 7
The first phase of the AI rally was dominated by the mega-cap technology companies most closely associated with AI, cloud computing and semiconductors. But Mackintosh said it is evolving as investors recognise the broader industries needed to support the buildout.
As more data centres come online, Mackintosh said electricity producers, utilities, gas turbine manufacturers and memory chip makers were all benefiting from the enormous demand created by the AI buildout.
“We’ve started to see an evolution of the AI trade. It’s really broadened away from the Mag 7,” he said.
The scale of spending helps explain why. Mackintosh said the world’s largest technology companies spent around US$500 billion on capital expenditure last year, with that figure expected to approach US$1 trillion within the next few years as they race to build AI capacity.
Mackintosh acknowledged investor concerns around adoption, pricing power and market share, but argued companies have little choice if they want to remain competitive as AI models rapidly improve.
“Everyone’s trying to make sure they’re staying pretty close to the leading edge, so that they have the market share and the models people want to use,” he said.
The biggest winners may not exist yet
Mackintosh drew a parallel with the internet boom, where telco companies built the networks and infrastructure that allowed the digital economy to take shape. But many of the biggest winners – including Amazon, Google, Netflix and Meta – emerged later by building businesses on top of that infrastructure.
“AI will enable businesses that we might not even realise could exist right now,” he said.
If history is any guide, the companies that create the greatest value from AI may not be the ones building today’s infrastructure, but those that eventually build on it.
Betashares Nasdaq 100 ETF (ASX: NDQ) aims to track the performance of the Nasdaq 100 Index (before fees and expenses).
