AI Spending Could Hit $1.6 Trillion—But This Manager Says It’s Not a Bubble

A top fund manager at T. Rowe Price predicts that spending on artificial intelligence (AI) could reach $1.6 trillion next year. Despite the massive figure, he argues the investment is safer than it looks, comparing the current climate to 1998 rather than the dot-com bust of 2000. The manager believes that the world’s largest tech companies, known as "hyperscalers," can easily afford this level of spending. He points out that these firms have strong cash flows, which means they can fund their AI projects without taking on dangerous levels of debt. More importantly, he says the returns on this investment will come quickly. The payback period—the time it takes for the AI infrastructure to generate enough profit to cover its cost—is expected to be short. This makes the spending efficient, not reckless. While some worry that heavy AI spending could lead to a market crash, the manager sees a different pattern. He draws a parallel to 1998, a year of strong growth before the internet bubble burst. In his view, the current AI boom is built on more solid business fundamentals, suggesting that the hyperscalers will see real and lasting profits from their massive bets.