ARTIFICIAL INTELLIGENCE

“AI’s buildout is also happening at a potentially unprecedented speed and scale. This shift to capital-intensive growth from capital-light, is profoundly changing the investment environment – and pushing limits on multiple fronts, physical, financial and socio-political.” – Blackrock

The quote highlights BlackRock’s observation that artificial intelligence (AI) infrastructure development is advancing at an extraordinary pace and magnitude, shifting economic growth models from low-capital-intensity (e.g., software-driven scalability) to high-capital demands, while straining physical infrastructure like power grids, financial systems through massive leverage needs, and socio-political frameworks amid geopolitical tensions.^1,2

Context of the Quote

This statement emerges from BlackRock’s 2026 Investment Outlook, published by the BlackRock Investment Institute (BII), the firm’s research arm focused on macro trends and portfolio strategy. It encapsulates discussions from BlackRock’s internal 2026 Outlook Forum in late 2025, where AI’s “buildout”—encompassing data centers, chips, and energy infrastructure—dominated debates among portfolio managers.² Key concerns included front-loaded capital expenditures (capex) estimated at $5-8 trillion globally through 2030, creating a “financing hump” as revenues lag behind spending, potentially requiring increased leverage in an already vulnerable financial system.^1,3,5 Physical limits like compute capacity, materials, and especially U.S. power grid strain were highlighted, with AI data centers projected to drive massive electricity demand amid U.S.-China strategic competition.² Socio-politically, it ties into “mega forces” like geopolitical fragmentation, blurring public-private boundaries (e.g., via stablecoins), and policy shifts from inflation control to neutral stances, fostering market dispersion where only select AI beneficiaries thrive.^2,4 BlackRock remains pro-risk, overweighting U.S. AI-exposed stocks, active strategies, private credit, and infrastructure while underweighting long-term Treasuries.^1,5

BlackRock and the Quoted Perspective

BlackRock, the world’s largest asset manager with nearly $14 trillion in assets under management as of late 2025, issues annual outlooks to guide institutional and retail investors.³ The quote aligns with BII’s framework of “mega forces”—structural shifts like AI, geopolitics, and financial evolution—launched years prior to frame investments in a fragmented macro environment.² Key voices include Rick Rieder, BlackRock’s Chief Investment Officer of Fixed Income, who in related 2026 insights emphasized AI as a “cost and margin story,” potentially slashing labor costs (55% of business expenses) by 5%, unlocking $1.2 trillion in annual U.S. savings and $82 trillion in present-value corporate profits.⁴ BII analysts note AI’s speed surpasses prior tech waves, with capex ambitions making “micro macro,” though uncertainties persist on revenue capture by tech giants versus broader dispersion.^1,3

Backstory on Leading Theorists of AI’s Economic Transformation

The quote draws on decades of economic theory about technological revolutions, capital intensity, and growth limits, pioneered by thinkers who analyzed how innovations like electrification and computing reshaped productivity, investment, and society.

• Robert Gordon (The Rise and Fall of American Growth, 2016): Gordon, an NBER economist, argues U.S. productivity growth has stagnated since 1970 (averaging ~2% annually over 150 years) due to diminishing returns from past innovations like electricity and sanitation, contrasting AI’s potential but warning of “hump”-like front-loaded costs without guaranteed back-loaded gains—mirroring BlackRock’s financing concerns.^3,4

• Erik Brynjolfsson and Andrew McAfee (The Second Machine Age, 2014; Machine, Platform, Crowd, 2017): MIT scholars at the Initiative on the Digital Economy posit AI enables exponential productivity via automation of cognitive tasks, shifting from capital-light digital scaling to infrastructure-heavy buildouts (e.g., data centers), but predict “recombination” winners amid labor displacement and inequality—echoing BlackRock’s dispersion and socio-political strains.⁴

• Daron Acemoglu and Simon Johnson (Power and Progress, 2023): MIT economists critique tech optimism, asserting AI’s direction depends on institutional choices; undirected buildouts risk elite capture and gridlock (physical/financial limits), not broad prosperity, aligning with BlackRock’s U.S.-China rivalry and policy debates.²

• Nicholas Crafts (historical productivity scholar): Building on 20th-century analyses, Crafts documented electrification’s 1920s-1930s “productivity paradox”—decades of heavy capex before payoffs—paralleling AI’s current phase, where investments outpace adoption.¹

• Jensen Huang (NVIDIA CEO, practitioner-theorist): While not academic, Huang’s 2024-2025 forecasts of $1 trillion+ annual AI capex by 2030 popularized the “buildout” narrative, influencing BlackRock’s scale estimates and energy focus.^3,5

These theorists underscore AI as a capital-intensive pivot akin to the Second Industrial Revolution, but accelerated, with BlackRock synthesizing their ideas into actionable investment amid 2025-2026 market highs (e.g., Nasdaq peaks) and volatility (e.g., tech routs).^2,3