But amid the hype, a critical question remains: Will all this investment in AI meaningfully translate into increased worker productivity?
Early signs point to yes. The chart above, tracking labor productivity in the U.S. nonfarm business sector, shows a long-standing divergence: productivity has steadily increased since the 1970s, while real wages have lagged. However, recent data suggests a potential inflection point. Labor productivity appears to be accelerating again, possibly signaling the early impact of AI-driven efficiencies. This echoes the pattern seen during the internet revolution of the late 1990s, when a wave of digital tools and connectivity led to a sustained boost in output per worker. If AI follows a similar trajectory, we may be at the precipice of a new era of productivity growth.
The optimism in the data is also backed by capital flows. Major technology firms are doubling down on their AI ambitions with unprecedented capital expenditures. Alphabet recently raised its 2025 capex guidance in its 2Q25 earnings call to $85 billion, up from $75 billion earlier in the year. Meta, Amazon, and Alphabet combined are expected to spend over $300 billion to build out AI infrastructure, from data centers to custom chips. These investments are not just about improving large language models, they are centered around embedding AI into workflows, products, and services across the economy. The goal is to make workers more efficient, which will drive long-term GDP growth.
The second wave of AI is application-layer innovation. Startups, like Cursor and Lovable, are enabling users to build software through natural language or drag-and-drop interfaces democratizing software development and reducing the time and cost of building digital tools. Emergent AI developments, while still very much in their pilot phase, represent serious potential to revolutionize professional workflows.
As with the internet revolution, the transition to an AI-powered economy is unlikely to be smooth. During the rise of personal computers and the internet, many traditional jobs were significantly affected or eliminated. These included the often-cited roles of typists, travel agents, office machine operators and several more. AI is expected to follow a similar path. In the short term, many roles involving repetitive tasks may be affected. Research indicates that AI is already displacing roles in industries like data entry and customer service, and that unemployment among college graduates in AI-exposed fields is rising due to AI performing much of the entry level work previously done by junior employees.
But history suggests that new technologies eventually create more jobs than they eliminate. The personal computer, once feared as a job killer, gave rise to entire industries, from software development to digital marketing. According to McKinsey, the internet ultimately created 2.4 jobs for every job it destroyed, leading to a net gain of over 15 million jobs in the U.S. alone. While there is justified uncertainty surrounding the impacts of AI, there is reason to remain optimistic regarding its future potential to drive global economic growth and create additional employment opportunities for the future labor workforce.