The $8 trillion arms surge fuelling AI — and spooking bonds: Mike Dolan
TLT•Planned additional G7 defence spending over the next decade may total about $8 trillion, alongside rising borrowing costs and investment in AI-related technologies. G7 defence spending is 2.0% of GDP and is projected to reach 3.8% by 2030.
1. Defence spending plans
Former US Navy Admiral James Stavridis estimated that additional defence commitments from G7 governments over the next decade amount to about $8 trillion, on top of prior trends. The G7’s combined annual GDP is just over $55 trillion, and defence spending has risen to 2.0% of GDP, its highest share in more than 30 years; that share is projected to reach 3.8% by 2030.
2. Technology and rearmament
Stavridis said defence procurement is likely to shift toward technology, drones, cybersecurity and battlefield AI, rather than focusing as heavily on warships and tanks. He said smaller companies in cyber, encryption and hypersonics are attracting more numerous, smaller deals, while data centres and their security overlap with both AI and defence investment.
3. Borrowing costs rise
The planned spending adds to pressure on public finances as borrowing costs rise. Average government borrowing costs across the G7 are at their highest since mid-2008, while annual interest expenses are nearly 85% higher. Advanced economies paid more than $3.3 trillion in interest on internationally traded government bonds over the past year, compared with estimated global spending of $2.6 trillion on AI and $3.1 trillion on defence.
