Fed Says US AI Investment Share Is Near Dot-Com Bubble Peak

The Federal Reserve has warned about the concentration of U.S. investment in artificial intelligence-related intellectual property and equipment, saying such spending as a share of gross domestic product is nearing levels seen at the peak of the dot-com bubble. If demand fails to keep pace with the investment boom, it could leave behind substantial idle capacity.

A recently released FEDS Note showed U.S. investment in intellectual property and equipment accounted for 11.33% of GDP in the first quarter. That was 0.16 percentage point below the 11.49% peak reached during the 2000 information-technology investment boom. It was also 0.79 percentage point above the 10.54% share for full-year 2024.

U.S. corporate investment has also been concentrated in AI infrastructure. In its latest Monetary Policy Report to Congress, the Fed said real business fixed investment in the U.S. rose 5.5% last year and climbed 11% in the first quarter. Most of that strength was tied to infrastructure build-outs supporting AI services.

The Fed likened the trend to the expansion of railroads and canals in the 19th century, which also left more capacity than demand could absorb. AI could leave behind a similarly large capital overhang if demand forecasts prove wrong. During the dot-com bubble, high investor expectations for the IT industry drove heavy spending, but demand failed to keep up, leaving substantial unused capacity in areas such as fiber-optic communications networks.

The Fed added that such overinvestment does not necessarily stem from irrational optimism alone. If AI delivers substantial productivity gains and sustains them, the economy could enter another long-term investment boom.

Kim Ju-wan, Hankyung.com reporter kjwan@hankyung.com