Capital Economics Says AI Investment Reversal Is Unlikely to Cause U.S. Recession

Capital Economics economist Stephen Brown says a reversal in U.S. artificial intelligence investment is unlikely to trigger a recession if growth in business and household demand for AI services does not slow sharply.

Capital Economics expects most developers to finish large projects that can take years, provided that demand growth does not slow sharply. Continuing those projects would reduce the risk of a sudden decline in employment or gross domestic product (GDP).

The firm also points to the makeup of investment and employment. Most physical investment consists of imports, and technology-related employment has not surged. Capital Economics says those conditions may mean companies have fewer workers to cut if investment retreats.