I won a Pulitzer for explaining the Great Depression. The AI spending boom terrifies me

I won the Pulitzer Prize for History for Lords of Finance, my account of how four central bankers’ decisions triggered the Great Depression. I have just completed 1873, a book on America’s railroad boom of the 1870s — the last time private capital flooded into a transformative new infrastructure technology at a scale comparable to 2%–3% of GDP. That research is why, when I look at the AI buildout today, I am genuinely frightened. When Chat GPT was first released in late 2022, few economists anticipated what an enormous impact it would have. Large language models have been adopted on a mass scale faster than virtually any other major technological innovation of the last century. This rapid adoption has triggered an epic capital investment boom, as technology companies have raced to expand spending on data centers, specialized chips, cooling systems, and the power generation capacity the technology demands. The five major technology companies—Amazon, Microsoft, Alphabet, Meta, and Oracle—along with the two leading independent model builders, OpenAI and Anthropic, and a host of other start-ups are projected to spend anywhere from $800 billion to $1 trillion a year for the next few years on AI infrastructure. These are staggering numbers amounting to 2%–3% of GDP, made all the more striking by how few hands they are concentrated in. I have seen numbers like these before. They did not end well. The Railroad That Broke America Large as these investments are, they are not entirely without precedent when measured against the broader economy. History offers several comparable episodes of private capital investment booms. The buildout of the fiber-optic network from 1995 to 2000, which provided the backbone of the modern internet, saw IT investment climb from 3% of GDP to nearly 5% at its peak. The investment surge of the Roaring Twenties—driven by the mass adoption of the automobile, the expansion of the electricity grid, and a construction boom in housing—was ano