--- title: "Are We Being Railroaded by AI?" description: "AI infrastructure spending hits $500B in 2024, ranking as the sixth-largest investment in US history. Projected to reach $983B by 2030, surpassing the New Deal but falling short of the railroad era's 6% of GDP peak." categories: ["AI","infrastructure"] keywords: ["AI infrastructure spending","data center investment","Microsoft Google Meta capex","OpenAI infrastructure","historical infrastructure comparison","railroad era GDP","New Deal spending","AI vs railroads","US GDP percentage","cloud infrastructure"] ai_summary: "AI infrastructure spending reaches $500B (1.6% of GDP) in 2024, making it the sixth-largest investment in US history. Projected to hit $983B by 2030 but would need $2.1T to match the railroad era's 6% of GDP." date: 2025-11-06 lastmod: 2026-07-30 canonical_url: https://www.tomtunguz.com/llm-impact-gdp/ author: "Tomasz Tunguz" --- Just how much are we spending on AI? Compared to other massive infrastructure projects, AI is the sixth largest in US history, so far. {{< email_image src="yjszhgaf77bhbnwtmhe8" alt="Just How Much Are We Spending on AI - Infrastructure spending as % of GDP" width="540" height="304" >}} World War II dwarfs everything else at 37.8% of GDP. World War I consumed 12.3%. The New Deal peaked at 7.7%. Railroads during the Gilded Age reached 6.0%. AI infrastructure today sits at 1.6%, just above the telecom bubble's 1.2% & well below the major historical mobilizations. | Project | Year | Spending (2025$) | % of GDP | | ------------------ | ---- | ---------------- | -------- | | World War II | 1944 | $1,152B | 37.8% | | World War I | 1918 | $138B | 12.3% | | New Deal | 1936 | $150B | 7.7% | | Railroads (peak) | 1870 | $18B | 6.0% | | Interstate Highways| 1964 | $142B | 2.0% | | AI Infrastructure | 2024 | $500B | 1.6% | | Telecom Bubble | 2000 | $226B | 1.2% | | Manhattan Project | 1945 | $36B | 0.9% | | Apollo Program | 1966 | $59B | 0.7% | Companies like [Microsoft, Google, & Meta are investing $140B, $92B, & $71B respectively](https://tomtunguz.com/msft-gcp-earnings-2025-10-30/) in data centers & GPUs. [OpenAI plans to spend $295B in 2030 alone](https://tomtunguz.com/openai-hardware-spending-2025-2035). If we assume OpenAI represents 30% of the market, total AI infrastructure spending would reach $983B annually by 2030, or 2.8% of GDP.[^gdp_growth] | Scenario | 2024 | 2030 | % of GDP (2030) | | -------------------------- | ----- | ------ | --------------- | | Current AI Infrastructure | $500B | - | 1.6% | | OpenAI Projected Spending | - | $295B | 0.8% | | Total Market (projected) | - | $983B | 2.8% | To match the railroad era's 6% of GDP, AI spending would need to reach $2.1T per year by 2030 (6% of projected $35.4T GDP), a 320% increase from today's $500B. That would require Google, Meta, OpenAI, & Microsoft each investing $500-700B per year, a 5-7x increase from today's levels. And that should give you a sense of how much we were spending on railroads 150 years ago! --- ## Sources **World War I & II:** - [NBER: The Economics of World War I](https://www.nber.org/digest/jan05/economics-world-war-i) - [EH.net: U.S. Economy in World War I](https://eh.net/encyclopedia/u-s-economy-in-world-war-i/) - [St. Louis Fed: Which War Saw the Highest Defense Spending?](https://www.stlouisfed.org/on-the-economy/2020/february/war-highest-defense-spending-measured) - [EH.net: The American Economy during World War II](https://eh.net/encyclopedia/the-american-economy-during-world-war-ii/) **New Deal:** - [Wikipedia: Works Progress Administration](https://en.wikipedia.org/wiki/Works_Progress_Administration) - [Wikipedia: Public Works Administration](https://en.wikipedia.org/wiki/Public_Works_Administration) **Railroads:** - Melville J. Ulmer, "Capital in Transportation, Communications, & Public Utilities: Its Formation & Financing" (1960), via [Silicon Valley Capital Partners](https://www.svcp.com/the-ai-spending-boom-is-massive-but-not-unprecedented/) - [NBER: Railroads & Economic Growth in the Antebellum United States](https://economics.wm.edu/wp/cwm_wp153.pdf) - [American-Rails.com: Railroads In The Gilded Age](https://www.american-rails.com/1880s.html) **Telecom Bubble:** - [Richmond Fed: Boom & Bust in Telecommunications](https://www.richmondfed.org/~/media/richmondfedorg/publications/research/economic_quarterly/2003/fall/pdf/wolman.pdf) **Apollo Program:** - [NASA: Apollo Program Budget Appropriations](https://history.nasa.gov/SP-4029/Apollo_18-16_Apollo_Program_Budget_Appropriations.htm) - [The Planetary Society: How much did the Apollo program cost?](https://www.planetary.org/space-policy/cost-of-apollo) **Manhattan Project:** - [Brookings Institution: The Costs of the Manhattan Project](https://www.brookings.edu/articles/the-costs-of-the-manhattan-project/) - [Nuclear Secrecy Blog: The price of the Manhattan Project](https://blog.nuclearsecrecy.com/2013/05/17/the-price-of-the-manhattan-project/) **AI Infrastructure:** - Microsoft, Google/Alphabet, Meta earnings reports & CAPEX guidance (FY24-25) - [Bureau of Economic Analysis: US GDP Data](https://apps.bea.gov/iTable/) --- ## Methodology All historical spending figures are adjusted to 2025 dollars using Consumer Price Index (CPI) inflation data. Each figure represents peak single-year spending in the year indicated. Percentages show spending as a share of GDP in that specific year, not as a percentage of today's GDP. For example, WWII's $1,152B represents actual 1944 defense spending ($63B nominal) adjusted for inflation, which consumed 37.8% of 1944's GDP ($175B). This differs from asking "what would 37.8% of today's $30.5T GDP cost?" which would yield $11.5T. --- [^gdp_growth]: Assuming 2.5% annual GDP growth to $35.4T in 2030 [^pwa]: New Deal PWA peaked at 2.5% of GDP in 1934 [^railroads]: Railroad capital expenditures peaked at 6% of GDP in 1870, according to Ulmer (1960) [^walmart]: Walmart: 2.2% of GDP, $648B revenue in 2024 [^amazon]: Amazon: 2.2% of GDP, $638B revenue in 2024 [^apple]: Apple: 1.3% of GDP, $391B revenue in 2024