Is the US AI tech boom just a bubble waiting to burst my international mutual funds?

The Gist: Some people believe we maybe in an AI bubble and that it is a highly sustainable one engineered by the US to inflate their GDP and manage their massive national debt.

It is completely natural to look at the massive amounts of money pouring into AI and worry about a 2008-style crash. If the AI bubble pops the global economy will likely come crashing down with it and take other sectors along for the ride. But to understand why this bubble is likely to sustain you have to look at the broader macroeconomic picture and the staggering $38T in US national debt.

The US government's game plan to manage this massive debt burden is actually quite simple. They need to drastically increase their GDP to outgrow the debt. Think of it like having a Rs 2Cr home loan with an EMI of Rs 3L.

If you lose your Rs 5L a month job your immediate goal is to find a new job paying Rs 10L a month so the debt burden becomes manageable again. The primary engine the US is using for this unprecedented GDP growth is massive AI spending. Companies like Meta are publicly planning to spend roughly 600 billion USD by 2028 on AI ventures.

This massive capital expenditure directly pushes the US GDP higher in the short term. In the long term AI creates real-world value through massive productivity increases which leads to systemic price deflation. Take Waymo's autonomous vehicles as an example.

A human taxi driver maxes out at 12 to 14 hours of productivity per day but a Waymo fleet can operate 24/7. This immediate 2x increase in productivity drives down costs across the board. So while it is a bubble it is currently the only game in town capable of generating the sustainable productivity enhancements required to outgrow the US national debt.

Disclaimer: All information shared above are strictly for educational and informational purposes only. It should not be construed as financial or investment advice.