AI’s GDP parallax
AI’s GDP parallax
NOVEMBER 3, 2026
Two numbers stand out from last week’s report: (1) 19% annualized growth in business investment (roughly 3x its historic average) and (2) 28% annualized growth in imports (4x larger than what’s typically observed). A sectoral decomposition of the first result helps to answer the question we posed in January: would the AI capex boom “crowd out” investment in the rest of the economy? And the second figure reveals how much AI-related spending ultimately flows to Asian businesses that manufacture chips designed in or destined for the US.
Annualized tech investment grew at a 61.2% nominal rate in Q3-2026 and accounted for 24% of aggregate US business investment, up 10-percentage points (+64%) since the launch of ChatGPT. Business spending elsewhere in the economy advanced at a 4.7% annualized rate, but nearly two-thirds of that was attributable to categories like “special industry machinery,” which includes semiconductor manufacturing equipment, and “power structures,” which includes electrical equipment and generation capacity tied to the data center buildout. After accounting for inflation, fixed investment outside of AI data centers finished the quarter down more than 5% from year-ago levels, while skyrocketing hardware prices effectively erased nearly 20 percentage points of the real value of the tech infrastructure acquired (Figure 1).
Figure 1: Decomposing the US fixed investment boom
US capital goods imports increased by 77% in September from year-ago levels and accounted for more than 100% of the growth in the US trade deficit (i.e. the trade balance in all other categories, including consumer goods, improved over the period). US aggregate demand is red hot, but so much of it is being met through imports of data center hardware that US real final sales[1] increased at just a 1.7% annualized rate during the quarter. Most of the value-added from the AI capex boom accrued to Asian supplier economies.
Numbers there have been off the charts. In Q3-26, Taiwan’s GDP grew by 14.4% from year-ago levels, more than 10 percentage points above its annual average over the prior decade. Nearly all that incremental growth is explained by the exports and capacity additions of Taiwan Semiconductor Manufacturing Company (TSMC), the foundry for the AI chips of Nvidia, Broadcom, AMD, Google, and Amazon. The AI capex boom has also delivered a 200-basis point boost to South Korea’s GDP growth, with semiconductor exports (principally memory chips) running 200% above year-ago levels.
Further upstream (and therefore less discussed), Japanese businesses provide the specialty electronic chemicals, equipment, and critical components that make AI hardware manufacturing possible. Relative to year-ago levels, AI-related exports added nearly one percentage point to Japan’s GDP (Figure 2), roughly the same magnitude as the AI impulse to Korean growth after accounting for the 2.3x differential in the size of these economies.
Figure 2: Q3 value accrues to Asian supplier economies
AI spending helped to insulate East Asian economies from what would have otherwise been a severe terms-of-trade shock. Japan, South Korea, and Taiwan are among the economies most exposed to the Middle East conflict because they rely on fossil fuel imports to meet between 80% and 95% of their primary energy consumption. Thanks to AI, the 25% increase in import prices (largely the result of a 44% increase in fuel prices) has been nearly offset by an 18% increase in the price of exports. And when accounting for the stability in fuel import volumes relative to the surge in the quantity of AI-related exports, the annual cross-border cash flow of these three economies has increased by more than $500 billion this cycle. Much of that surplus has been directed towards US stocks, helping to support their customers’ valuations and spending plans (Figure 3).
Figure 3: AI capex boom adds $500bn to Asian supplier economies’ cash surplus
Treasury Secretary John Connally famously described the US dollar as “our currency, but your problem” to a group of finance ministers in the early 1970s. Something similar could be said about the risk of a sudden unwind of the AI capex boom. The hit to the US economy might not be as dramatic as some fear, as real resources (capital, labor, materials, grid connections, etc.) get reallocated to the sectors that’d been crowded out. But foreign supplier economies under pressure to scale capacity might want to prepare for the chance that good times don’t last forever.
1. This represents the real (i.e. inflation-adjusted) growth in the sales of US-based businesses or subsidiaries, net of the change in inventories.
JASON THOMAS
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