AI data centre investment boom is peaking, says S&P Global chief economist

The global economy currently navigates a "tug of war" between geopolitical fragmentation and a massive AI-driven investment boom. Paul Gruenwald, Global Chief Economist at S&P Global Ratings, observes that data center investment—contributing roughly half of U.S. private sector spending growth—is currently offsetting downsides from trade tensions and energy volatility. While AI capital expenditures are projected to exceed $1 trillion annually, historical precedents like the railroad and dot-com booms suggest that while infrastructure will inevitably be built, not all market participants will survive the "winner-take-all" contest. Simultaneously, the bond market is adjusting to a "new era" of normalized yields, moving away from the post-2008 period of extraordinarily low rates. Despite political pressures, the Federal Reserve appears poised to implement 75 basis points in rate hikes to reverse previous "insurance cuts" and combat persistent service-sector inflation, prioritizing its 2% target over market volatility.