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Global AI investment may fall 10pc in 2028: Capital Economics

Published : Wednesday, 11 November, 2026 at 6:01 PM

Observer Online Report

Collected Photo

Global investment in artificial intelligence (AI) could decline by 10 per cent in 2028, potentially weighing on stock markets and economic growth, particularly in the United States, according to UK-based research firm Capital Economics.

The forecast warns that slowing AI infrastructure spending could trigger a correction in technology stocks and weaken economic activity as companies struggle to generate returns from their massive investments.

Capital Economics Chief Economic Adviser Vicky Redwood said AI had significant potential to boost productivity, but questioned whether revenues from AI services would justify the huge capital expenditure by major technology companies.

Investment by major hyperscalers, including Microsoft, Google, Amazon and Meta, could reach $800 billion this year, nearly double the previous year's level, before exceeding $1 trillion in 2027, according to the firm's estimates.

A 10 per cent decline in AI investment in 2028 could reduce US GDP growth by 0.1 percentage point, Redwood estimated. AI-related investment added around 0.3 percentage point to US GDP growth last year.

Taiwan and South Korea could also face economic headwinds as lower spending on AI servers, semiconductors and related infrastructure may weaken demand for their technology exports.

Redwood also forecast that the S&P 500 could fall 12 per cent from its current level by the end of 2027, with technology-heavy indices potentially facing steeper losses as investors reassess the earnings prospects of major technology companies.

A stock market correction could further weaken consumer spending through the wealth effect, as declining asset values reduce household wealth and discourage expenditure. The stock market rally contributed around 0.4 percentage point to US GDP growth over the past year, according to Redwood.

However, slower investment would not necessarily mean a halt in AI adoption. Redwood said businesses could continue expanding AI use and improving productivity by relying on existing infrastructure, even as spending on new facilities moderates.

Major hyperscalers are also expected to maintain investment to replace ageing equipment, expand operations and retain their competitive positions in the AI market.

-AH

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Editor : Iqbal Sobhan Chowdhury

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