How much is artificial intelligence threatened by high interest rates and global debt?
Ruchir Sharma analyzes the financial pressures behind the artificial intelligence boom, highlighting how record global debt and high interest rates are forcing tech giants to compete with governments for capital as borro
Ruchir Sharma analyzes the financial pressures behind the artificial intelligence boom, highlighting how record global debt and high interest rates are forcing tech giants to compete with governments for capital as borrowing scales rapidly.
According to an analysis by Rushir Sharma, chairman of Rockefeller International, the notion that a technological revolution can develop independently of basic economic rules is reminiscent of past stock market bubbles. The price of money still plays a key role, and rising interest rates may pose the biggest risk to the current industry boom.
Unlike in previous decades, global debt levels are at historic highs, forcing governments to compete directly with businesses for available capital. This situation is limiting liquidity in the market. Building the necessary infrastructure for artificial intelligence, such as data centers, requires huge amounts of money, as a result of which large technology groups are increasingly turning to borrowing. It is estimated that debt issuance related to the sector will exceed $600 billion, an amount tenfold compared to 2024.
The financial environment has changed drastically after a long period of low cost of money, with investors now demanding higher returns, squeezing the weaker companies in the value chain. Sharma points out that the major crises of the past did not occur suddenly, but started in more vulnerable sectors before spreading to the wider economy.
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While industry advocates argue that the technologyโs momentum is enough to outweigh the higher costs, investment in AI is not boosting the rest of the economy. Outside of this sector, lending remains limited, meaning AI companies may struggle to grow if their customers donโt have the financial clout to leverage their services.
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Originally published by Dev.to AI. Aggregated on AIWithGhost for educational purposes โ full credit and traffic to the original publisher.