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Slok said that the AI boom is absorbing capital, electricity and workers at a pace that could leave other parts of the economy struggling to compete for resources.
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He described the dynamic as a form of “Dutch disease,” where a booming sector draws resources away from other areas of the economy.
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In this case, the rapid expansion of data centers and AI infrastructure is creating particularly strong demand for capital and power, according to Slok.
The artificial intelligence boom is creating a new set of challenges for the U.S. economy, according to Apollo Global Management Chief Economist Torsten Slok.
Slok argued in a note on Friday that the rapid expansion of AI investment is creating an unusual economic imbalance, with resources increasingly flowing toward the sectors supporting the AI buildout.
Slok Says AI Boom Is Pulling Resources Away From Other Sectors
The AI boom is absorbing capital, electricity and workers at a pace that could leave other parts of the economy struggling to compete for resources, Slok said.
He described the dynamic as a form of “Dutch disease,” where a booming sector draws resources away from other areas of the economy. In this case, the rapid expansion of data centers and AI infrastructure is creating particularly strong demand for capital and power.
That is happening even as more rate-sensitive parts of the economy, including housing and autos, face greater pressure from elevated interest rates.
The contrast is especially notable because higher borrowing costs would normally be expected to cool investment and spending. Slok said the AI buildout has been different, with hyperscalers continuing to spend heavily as they compete to expand their AI capabilities.
Consensus estimates for AI capital expenditures in 2027 have continued to rise, he noted, with no clear indication that investors expect the spending boom to slow next year.
AI Could Make The Fed’s Job Even Harder, Warns Slok
Slok warned that this imbalance creates a difficult situation for the Federal Reserve because monetary policy is having different effects across the economy.
Higher rates are weighing on sectors such as housing and autos, but they have done little to curb the AI investment boom, he said.
Slok cautioned that if AI spending continues to support economic activity while also contributing to inflationary pressure, the Fed could find it harder to use interest rates to cool the broader economy.