Data Center Spending Needs to Be at $1.4 Trillion in Next 5 Years, Says Cathie Wood

Well, I think we're very focused on the deregulation, lower taxes and what we believe will be lower inflation, much lower inflation and lower interest rates in the U.S. And we think the combination of those is actually going to drive the returns on invested capital in the U.S. up relative to those in the rest of the world. And I think many people are underestimating, especially on the corporate tax side, that thanks to the new depreciation schedules, our effective corporate tax rate, not the statutory, but the effective will drop to one of the lowest in the world at roughly 10%, certainly near a record low for the U.S.

No, it is very interesting. Maybe a lot of your guests have been talking about the depreciation schedules, how massively they are going to encourage capital investment here in the United States. So we've never had full depreciation in year one of manufacturing facilities, full depreciation in the first year of service. That means corporations will get huge tax refunds, that they will be able to reinvest into innovation because we also have equipment, domestic R&D and software. Those three full depreciation, first year of service that has been legislated. Normally we get, oh, a few years of this, you know, this cut, not cut, but that has been legislated nowadays all the time. So we don't think people understand how profound some of these tax changes are.

Absolutely. Absolutely. I mean, we're having huge build outs of data centers and power facilities. All of those depreciation schedules will apply to this boom in investment and contribute to it. So, yes, and in fact, Carol, I was just going to say, many people think we're in a bubble. And yes, the data center spending last year was about $500 billion. And you can see all of this in our Big Ideas report. We just released it yesterday. And thank you, Bloomberg, for featuring it. But $500 billion is a two and a half times increase from where it had been trending for years. So big increase, no doubt about it. But we think that number needs to go to 1.4 trillion in the next five years to accommodate the AI boom that is now under way and is going to drive productivity gains incredibly.

Okay. Well, we're in a technology revolution, and many people thought that the Internet was a technology revolution. And to some extent it was. But today, instead of just one major platform evolving, we have five. So robotics, energy storage, blockchain technology and multi-omics sequencing in the life science space, which we believe is the most profound application of AI in health care. And so this boom, if you look back at the railroad boom, the amount of investment that we saw back then was about 6% of GDP at its peak, 5 to 6%. The Internet boom was more like the auto boom in the early 1900s. It was more in the 3 to 4% of GDP range. We believe this five platform innovation strategy or boom is going to move to 12% of GDP. And we do believe also that productivity growth will accelerate to the 4 to 6% range and be sustained there. Normally, we see a cyclical peak around there and then it falls back. We think it will be sustained. And we think that by the end of this decade, real GDP growth could be averaging more than 7% per year. And I know that sounds shocking given that we've been at 3% for 125 years. But it is the history associated with technology revolutions, a step change up in GDP growth.