AI spending frenzy could reshape the economy, Bridgewater CIOs say
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FILE PHOTO: A message reading "AI artificial intelligence", a keyboard, and robot hands are seen in this illustration taken January 27, 2025. REUTERS/Dado Ruvic/Illustration/File Photo
Jan 26 (Reuters) - Spending on artificial intelligence by large corporations will continue to grow exponentially and reshape the economy, Bridgewater Associates' co-chief investment officers said in a client note on Monday.
AI has emerged as the key driver of global corporate investment and a central force behind the market rally, altering capital spending plans across industries.
A surge in corporate spending across the AI supply chain, from data center infrastructure to chips and power, has helped lift equity markets even as worries grow over a potential market bubble and the boom's sustainability.
"Straightforward game-theoretic calculations make it unacceptable for these companies to accept falling behind rivals by even a few months of progress, so one company’s decision to spend more aggressively on AI capex compels others to follow," the investment firm's co-CIOs Bob Prince, Greg Jensen and Karen Karniol-Tambour wrote.
Global stocks swung sharply in the fall as growing concern over a potential AI stock bubble weighed on sentiment and heightened the risk of a selloff. Still, Wall Street’s main indexes ended 2025 with double-digit gains, buoyed by strong investor demand for AI-linked stocks.
Bridgewater CIOs said a surge in AI capital spending could increase inflation as higher demand pushes up prices of items in its ecosystem, including chips and electricity.
They added that the dynamics could push up risks and create bubble-like conditions.
"Easy policy risks further accelerating speculative equity market activity and the frenzy of deal-making and AI investment that’s already underway, creating a ripe environment for a bubble, and risks enabling a cyclical overheating," the note said.
(Reporting by Manya Saini in Bengaluru; Editing by Tasim Zahid)
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