Artificial intelligence is dominating boardroom agendas and market narratives - but the key question remains: is the AI boom a long-term transformation, or the makings of a bubble?
In the first episode of CommBank’s new weekly podcast, CommBank View: Economics & Markets, Chief Economist Luke Yeaman sat down with host Mandy Drury to unpack what’s driving the surge in investment and enthusiasm, and what it could mean for productivity, growth and Australia.
“You can look around the world today and see a much more difficult, more dangerous, more volatile economic era,” Yeaman says. “But then you’ve got AI, this big tech wave flowing through our economy, and I really do think there is a real upside there.”
“AI is the one thing that could offset many of these other negatives. We could see a big lift in productivity, a big lift in investment and a big lift in growth - if we get it right.”
Is there an AI bubble?
“It’s certainly not irrational to be concerned," Yeaman says. "History says we tend to overestimate the benefits of new technologies in the short term and underestimate them in the long term.”
“Typically, people get very excited, they pile in, and we see overinvestment. At some point, when earnings don’t keep up with that exuberance, there’s a crash.”
But this is very different from the dot-com bubble.
“Today’s hyperscalers are starting from a highly profitable base. As they’ve ramped up investment into data centres and computing capacity, they’ve actually become more profitable, not less.”
AI is already showing up in the economic data
Yeaman says investment is where AI is having the most immediate macroeconomic impact, with data centre buildouts and computing capacity spending now large enough to influence GDP and national accounts.
“Investment is the area where we’re seeing the most direct and immediate impact of AI on economics today,” he says.
“Total expenditure by the big US hyperscalers this year is likely around US$550 billion - roughly 2 per cent of US GDP. That’s a very large additional spur into the economy.”
“This is probably a multi-year investment upswing… potentially three, five, even seven years,” Yeaman adds.
Australia is “getting its share of the pie”
While the United States is “way ahead of everybody else” in AI investment and commercialisation, Yeaman says Australia is still emerging as a meaningful destination for AI-linked infrastructure, particularly data centres.
“Australia is definitely getting its share of the pie at this stage,” he says. “You need land, energy, preferably renewable energy, water, and importantly, a safe, trusted, secure environment. Australia has a lot of those characteristics,” Yeaman says.
CommBank analysis estimates a substantial pipeline of projects.
“We estimate around six gigawatts of new data centre capacity in the pipeline in Australia - about $150 billion of investment,” he says.
What it could mean for interest rates
Yeaman says AI investment adds to demand at a time when central banks are already trying to balance supply constraints and inflation pressures.
“AI is adding to the demand side of the economy and putting upward pressure on interest rates,” he says. “These investments are not particularly susceptible to changes in interest rates. Higher rates aren’t necessarily going to kill off this investment.”
Globally, he sees AI as part of a broader pivot from the “savings glut” era toward stronger investment, with implications for long-run interest rates.
“AI is one part of a broader global investment upswing… that we think will put upward pressure on neutral interest rates.”
The wild card: AI plus robotics
Looking further ahead, Yeaman flags robotics as the potential accelerator that could expand AI’s reach into physical-world jobs currently viewed as safer.
“The next frontier is AI combining with much more sophisticated robotics,” he says.
While he frames it as a longer-dated risk, he notes the pace of progress is rapid.
“That’s probably more of a 2035 story than a 2030 story — but we’re moving fast in this space… Keep an eye on that one.”
