Musk Projects AI Could Double US GDP Growth to 4% Next Year

Elon Musk has projected that artificial intelligence could roughly double the pace of United States economic growth next year, taking expansion from about 2 per cent to around 4 per cent. In a post on X, the Tesla and SpaceX chief said the gain could be even larger.

The forecast arrives as the wider AI investment cycle confronts its first significant macroeconomic test, according to an assessment by brokerage firm Dolat Capital.

The brokerage noted that the present spending wave differs from earlier technology cycles. Major hyperscalers have shifted away from asset-light models centred on returning cash to shareholders and toward large-scale capital expenditure, funding these investments through a mix of internal cash flows, debt and equity.

With central banks taking a more hawkish stance, the cost of financing an already capital-intensive investment cycle has risen. Bond yields have climbed amid heavy government borrowing, policy normalisation in Japan, and higher spending on infrastructure and defence, all of which are adding to pressure on the global cost of capital.

Monetisation remains the biggest unresolved question. Falling token costs, improving model efficiency, rapid technological change and the limited window to earn returns on successive AI models have raised doubts over whether revenues can grow fast enough to justify the scale of capital being deployed.

The central risk, the brokerage said, is not demand for AI but whether each additional unit of investment continues to yield sufficient returns to sustain current spending levels. It also pointed to recent calls from AI company leaders for a more measured pace of frontier-model development, which could lengthen the time needed to recover investments while infrastructure spending stays elevated.

The outlook for the cycle will increasingly hinge on the US 10-year Treasury yield, Federal Reserve communication and how long the rate-hike cycle lasts. The report also flagged a supply-demand challenge in the US Treasury market, with USD 8 trillion of Treasuries requiring refinancing, and noted that the recent rise in bond yields carries a significant real-rate component, suggesting pressure on long-term borrowing costs may persist.

For global equities, the combination of higher yields, tighter liquidity and uncertainty over AI monetisation could prove challenging. The next leg of AI momentum, the brokerage said, will be shaped by hyperscaler guidance, the pace of AI monetisation and the direction of yields.