Infrastructure investment has tended to follow fixed patterns.
What’s happening with AI investment today mirrors the electrification boom of the 1900s with eerie precision.
- When Britain industrialized, steam power was 0.5% of GDP annually.
- America's grid expansion in the 1950s required 1.2% of annual GDP.
- Today, China allocates 0.9% of annual GDP to electrical infrastructure.
These aren't coincidences.
The math reveals a constant - new fundamentally transformative technologies require 0.5% to 1% of GDP in sustained infrastructure investment to create and sustain economic growth.
Generative AI’s projected required investment is tracking this trajectory.
The Big Techs are lining up $300bn in AI spending in 2025, which comes to about 1% of the US GDP, matching the precedents set by previous tech booms.
What's different this time is speed.
Historical S-curves of productivity gains (from electricity, Internet, etc) needed as many as 40 years to mature.
AI is compressing this ‘realization period’ to a decade.
Two critical facts explain why this infrastructure phase is necessary:
- AI compute requirements will demand 128GW of additional power by 2029 - equivalent to 15 nuclear plants worth of energy
- Historically, tech revolutions have NEEDED a backend that can support them - and that backend ends up coming to investment worth between 0.5% and 1% of GDP
The pattern is unmistakable.
Like electricity before it, AI requires robust physical infrastructure before the software built on it can flourish. The UK's £60B grid expansion directly supports this digital transformation, mirroring their industrial electrification a century ago.
Societies consistently allocate between 0.5% and 1% of GDP to transformative infrastructure to fully realize the productivity gains.
So we are witnessing the acceleration of core economic principles which have governed technological revolutions for 250 years:
Infrastructure first, economic growth second.
** Edison's Jumbo dynamo at Pearl Street Station, the first purpose-built central power plant in the US.