Money is flowing into artificial intelligence, but what about other sectors? Nobel laureate warns of the danger
Huge funds being directed towards the construction of data centers for artificial intelligence may be limiting investment in other sectors of the economy. Nobel laureate in economics Paul Krugman expressed this opinion after analyzing the flow of investments in the US.
Money is flowing into artificial intelligence, but what about other sectors? Nobel laureate warns of risk
Developing neural networks requires massive computing power, servers, software, and electricity. This need is accelerating the construction of data centers, creating huge orders for technology companies and the industries that serve them.
However, Krugman pointed to another aspect of this process: as a rapidly growing sector attracts funds and resources, the investment opportunities for other sectors may shrink.
How has investment in construction changed?
According to the figures presented in the article, from January 2024 to July 2025, private construction spending in non-AI-related areas in the US decreased by $120 billion, or about 5 percent. During the same period, construction indicators related to neural network infrastructure increased by $51 billion.
These figures do not cover all private investments in the economy. This is about funds spent on construction. Expenditures on equipment and software are calculated separately.
Also, the opposite movement of the two indicators does not mean that all of the decreased funds have shifted specifically to the artificial intelligence sector.
How can one sector crowd out others?
In economics, this phenomenon is called "crowding out of investment." When competition for funding and other resources intensifies, some projects become more expensive to implement or are delayed.
According to Krugman's interpretation, massive investments in artificial intelligence increase the demand for loans. The rising cost of borrowing, in turn, can negatively affect areas such as housing, office, and factory construction.
Technology companies can continue spending even under conditions of more expensive financing. In other sectors, however, rising interest rates make new projects economically less attractive.
Costs are not just about data center buildings
Krugman emphasizes that the construction of data centers is only a part of the funds being directed towards artificial intelligence. Major expenses go towards computing equipment and software.