ROI-AI may be rocket fuel for US stocks, less so for GDP: McGeever
SPY•AI investment is lifting US stocks while imports of data-center equipment widen the trade deficit and weigh on GDP growth. The deficit reached $105.6 billion in August, and an economist cited in the article sees it possibly expanding toward 4% of GDP.
1. Imports weigh on growth
Demand for equipment used to build US AI data centers and infrastructure is surging, but much of it comes from abroad. The US trade deficit widened to $105.6 billion in August, its widest in 17 months, as imports rose 4.3% to a record $420.8 billion.
2. AI spending and GDP
The trade deficit was 2.7% of GDP in the first quarter and 3% in the second. Dean Maki of Point72 said he expects deficits to continue and probably expand over the next year; he said annual GDP growth in the second quarter was only just above 2%, despite business equipment spending growth of more than 16%.
3. Asian surpluses grow
UN Trade and Development estimated around three-quarters of last year's rise in US goods imports was AI-related hardware, while a Minneapolis Fed paper estimated about 70% of AI-related capital spending is on imported goods. South Korea and Taiwan together ran an annualized trade surplus of $800 billion in September, Brad Setser said, up from $100 billion two years earlier.
