Financing the AI Physical Capital Buildout

The amounts of money being spent on the hardware and buildings behind the new AI boom may turn out to be enormously large by historical standards. How is it being financed? Stijn Van Nieuwerburgh tells the story in “Financing the AI Buildout” (Brookings Papers on Economic Activity, Fall 2026, conference draft version). As he points out, the new AI technologies are often discussed as a new form of software, and how the capabilities of that software are developing. The software perspective is true, but partial. The new AI technologies are also a physical capital boom. Indeed, our public discourse on AI seems to have entered a period where one set of concerns is that Ai software will be so cheap and available that it will lead to mass unemployment, while another set of concerns is that building the physical capital behind the AI boom–including data centers, semiconductor plants, additional energy production, and more–will be extraordinarily expensive. I’m alwas loathe to make…