OPINION:
America is betting the ranch on artificial intelligence.
In 2026, just five companies — Alphabet, Meta, Microsoft, Amazon and Oracle — will invest $800 billion in AI. That is up from $400 billion in 2025, or 2.5% of gross domestic product.
This year, nonresidential investment for the entire economy should be $4.7 trillion. Yet virtually all the growth is in information processing equipment, software and research and development — that is AI.
Over the next four years, those firms are expected to spend about $4 trillion. It is not excessive.
Investments such as these made America a great nation.
Whereas President Biden and his heirs on the left would overregulate and stifle AI, President Trump is torn between championing AI and limiting its foreign use.
The 2.5% of GDP is comparable to the railroad construction boom of the 1850s. It dwarfs the transcontinental railroad after the Civil War, the Interstate Highway System and the Apollo space program.
It will pay out, but perhaps not for all five big spenders.
Profiting will be software designers such as Salesforce, which produces AI agents sold on a subscription basis to review documents and draft contracts in legal departments, replace operators at call centers and perform back-office functions across businesses.
As this column anticipated, advertising that accompanies free access to AI via search engines is becoming significant.
In 2025, Alphabet’s revenue grew by $17 billion, importantly powered by Google searches with Gemini.
Scale that potential across five companies, and we get $85 billion. Over four years, it is $425 billion, or about 10% of the investment in AI.
Even if not all five do as well as Google, software designers and firms such as Walmart will enter the race. The retailer is building agents for suppliers and workers, transforming the management of its bricks-and-mortar shops.
Many laggards, such as Target, will fall by the wayside.
In any gold rush, it is the folks who make the shovels — chipmakers such as Nvidia, Advanced Micro Devices and Broadcom and software companies such as Salesforce — and early adopters such as Walmart, who piggyback on the technology, who profit most.
Still, several things could derail all this.
As it is inclined, Wall Street panicked, and stocks tumbled in February when Citrini Research published a paper hypothesizing that AI could trigger a severe recession by driving down software prices or causing mass layoffs among white-collar workers.
The assembly line and automation did contribute to the Great Depression by creating an avalanche of cheap goods, bought on credit that ultimately could not be repaid.
Yet we want AI to break up software and other technology monopolies.
Under the cover of 2.7% tariff-supported inflation in 2025, Microsoft increased the annual subscription price for its Office 365 package by 30%. Xfinity boosted my cable-internet service from $256.61 to $279.70. That is 9%.
Neither company uses much tariffed steel, but as an academic living behind ivy walls, I must pay up.
The transcontinental railroads cut freight costs tenfold, and prairie prosperity put displaced Teamsters into other jobs in the towns that sprang up in the West.
For the nation, the real threats to the AI payout are bad immigration policies that precipitate an employment crisis.
Mr. Trump’s tariffs are not creating enough new factories, and nearly 28% of the unemployed have been searching for jobs for more than six months.
Hardship withdrawals from tax-sheltered retirement accounts are booming.
Immigrant labor complements native-born workers. Mixing the sweat of both creates jobs and accelerates growth. Mr. Trump’s AI action plan calls for big investments in capital equipment and people to do the work.
Yet in addition to construction workers and California lettuce pickers, immigrants fill about one-fifth of STEM positions and more than two-fifths of doctoral-level science and engineering roles.
In the first 16 months of Trump 2.0, the economy added about 46,000 jobs a month. Indigenous population growth alone could support about 25,000.
What made the transcontinental railway a huge economic development success was not the fortunes earned by railway barons; the Union Pacific, Northern Pacific and Santa Fe all ultimately went bankrupt. It was, instead, the parade of prairie schooners that settled the West.
In the summer of 2023, unemployment was about 3.6% — full employment by any economist’s definition. Yet during the last 15 months of the Biden presidency, the economy continued to grow robustly thanks to immigrants, and added 127,000 jobs a month.
The AI boom could cause a terrible recession if not enough immigrant labor — techies and construction workers — is available to complement the white-collar unemployed and create jobs and growth.
Walmart needs customers. Google and, in turn, Nvidia need Walmart to make this whole enterprise work.
Someone must buy the chips (the likes of Google), and someone must buy its ads (the retailers that need a growing customer base to buy more ads).
Immigrants help native Americans create jobs and shop at Walmart just like everyone else.
• Peter Morici is an economist and emeritus business professor at the University of Maryland, and a national columnist.
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