Federal Reserve Chairman Jerome Powell doesn’t think the AI boom is another dot-com bubble. In fact, he made that distinction explicit on Wednesday, arguing that the current wave of investment in artificial intelligence is based on for-profit companies and real economic activity, rather than speculative exuberance.
“I won’t get into specific names,” Powell told reporters after the Federal Reserve policy meeting, “but they actually have profits.
“These companies… actually have business models and profits and that kind of stuff. So it’s really something different” from the dot-com bubble, he added.
The comments mark what appears to be Powell’s most direct acknowledgment yet that corporate development of AI – spanning hundreds of billions of dollars in investments in data centers and semiconductors – has become a genuine driver of US growth.
Powell emphasized that the explosion of AI spending is not being driven by monetary policy or cheap money.
“I don’t think interest rates are a big part of the AI or data center story,” he said. “It’s based on longer-term assessments that this is an area where there will be a lot of investment and that will drive greater productivity.”
That observation runs counter to a market narrative that easing financial conditions could be fueling an asset bubble in the technology sector. Instead, Powell suggested that AI development is more structural: a commitment to long-term work transformation. From Nvidia on track for half a trillion dollars in revenue to Microsoft and Alphabet’s capital spending plans worth several hundred billion dollars, the scale is unprecedented. But, according to Powell, it is also founded.
Goldman Sachs agrees. In a research note titled “AI Spending Boom Not Too Big,” US Chief Economist Joseph Briggs argued that “anticipated investment levels are sustainable, although the ultimate winners from AI remain less clear.”
Briggs and his team estimated that the productivity unlocked by AI could be worth $8 trillion in present value to the US economy, and potentially up to $19 trillion in high-level scenarios.
“We are not concerned about the total amount of investment in AI,” the Goldman team wrote. “AI investment as a percentage of US GDP is lower today (<1%) than in previous major technology cycles (2%-5%).” In other words, there is still a lot of room to go.
Powell’s approach echoes that view: The AI race, though sometimes frothy, is being financed primarily through corporate cash flow rather than speculative debt.
Powell noted that the wave of investment is manifesting itself in the real economy. “It’s the investment we’re making in equipment and all those things that are needed to create data centers and power AI,” he said. “It is clearly one of the great sources of growth in the economy.”