Tired of reading about data centers yet?
Is the AI buildout about tech or growth story?
Workforce disruption vs the need to own growth assets
The AI debate usually starts with fear. The AI overlords at Anthropic, Open AI, Google and Microsoft have told us to be afraid of the power of AI.1 This is either to scare people into using their tool because it is so awesome it is scary, or they really know things that we should be afraid of and are too greedy to change course. The rest of us are just afraid that AI will make mid level white collar workers the next factory jobs and there will never be another 23 year old who gets hired.
The sentiment data shows people are worried across the board.2 Younger workers are especially anxious, and for good reason.3 Entry-level roles in some AI-exposed fields are already under pressure. Junior positions are our training grounds. They teach people how to work inside a business, respond to direction, show up on time appropriately dressed, solve problems, manage responsibility, and eventually become leaders.
If AI removes too many of those early rungs before new ladders are built, that is a real economic problem.
But the broad labor-market data does not yet support the simple story that AI is destroying employment across the economy. The evidence so far is more specific. Some entry-level roles are under pressure, tasks are being automated, companies are experimenting, but mass displacement has not yet shown up in the aggregate labor data. 4
At the same time, something very large is happening on the investment side. The AI infrastructure buildout is becoming one of the biggest capital spending waves in American history.5
Data centers require land, power, cooling, electrical equipment, semiconductors, networking, construction labor, engineering, maintenance, utilities, and a long list of suppliers. It is software supporting industry.
The U.S. economy is getting meaningful support from AI-related capital expenditure with the data center buildouts as a central force of growth. Without that investment, U.S. GDP growth would likely look much weaker.
The AI buildout may be carrying more of the economy than many clients realize.
That does not mean every data-dollar invested will earn an attractive return or that every data center is well sited. Local concerns about water, power, noise, or electricity costs are significant concerns in both red and blue states. Communities should demand credible plans.6 Hyper-scalers should not be allowed to privatize profits while pushing costs onto local ratepayers.
But complaining about it will not make it go away, it will just move the data center to a state or county less patient to wait see what happens with the current buildouts. Most of the states and counties that have been said to ban data centers are actually pausing approvals to judge the impacts of buildouts that are underway.7 Will they miss out on an opportunity or dodge a bullet? We will see.
We might need a massively more productive workforce who can leverage AI automation to do more with less. Slower population growth, lower fertility, and tighter immigration may all constrain future labor-force growth requiring higher productivity per worker.8
It is about productive capacity.
For clients the future may increasingly reward ownership of productive assets. If AI allows more economic output to be generated with less labor, then the difference between earning income and owning capital may become even more important.
That will require disciplined participation in fragile, but productive markets. Clients may need exposure to long-term growth and diversification beyond the obvious winners. They may also need robust risk management because capital spending booms have historically overshot.
Advisors should help clients hold three ideas at once. First, AI may pressure parts of the labor market, especially for younger workers trying to enter certain fields. Second, AI may also be one of the most important sources of productivity, investment, and capital returns over the next decade. Third, AI at some point may crash, following the ark of every technological innovation thus far, if revenue growth does not catch up to expenditures, competition undercuts our market, or physical buildout constraints limit further growth.
The advisor’s role is not to predict every winner. It is to help clients build a portfolio and a financial plan that can adapt as the race unfolds.
- https://www.bloomberg.com/news/articles/2023-05-30/ai-leaders-warn-of-risk-of-extinction-from-the-technology?utm_source=chatgpt.com
- chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://fm.cnbc.com/applications/cnbc.com/resources/editorialfiles/2025/08/08/cnbcsurvey.pdf?utm
- https://news.gallup.com/poll/712751/americans-cool-toward.aspx?utm
Disclosure:
Toews Asset Management is an SEC registered investment adviser with its principal place of business in the State of New Jersey.
This article may include forward-looking statements. All statements other than statements of historical fact are forward-looking statements (including words such as “believe,” “estimate,” “anticipate,” “may,” “will,” “should,” and “expect”). Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Various factors could cause actual results or performance to differ materially from those discussed in such forward-looking statements.
All information referenced in the preparation of this material has been obtained from sources believed to be reliable, but accuracy and completeness are not guaranteed.
This is intended to provide general information only and should not be construed as an offer of specifically tailored individualized advice, and no representation is being made as to whether the information provided herein would be beneficial for any or for a specific investor.
For additional information about Toews, including fees and services, send for our disclosure statement as set forth on Form ADV by contacting Toews at Toews Corporation, 1750 Zion Road, Suite 201, Northfield, NJ 08225-1844 or by visiting our website: www.toewscorp.com.