Big tech firms are set to splurge over $1 trillion on AI infrastructure in 2027 as demand for computing power continues to grow faster than supply, according to a report by UBS.The investment boom is also helping boost US economic growth, even as companies face rising funding needs. Spending on AI infrastructure is expected to cross $600 billion in 2026 before topping $1 trillion in 2027, the report stated.“Demand has exceeded capacity ahead of schedule,” UBS said, pointing to the growing pressure on companies to expand their computing infrastructure to keep up with demand.It expects spending to rise further over the next year, although the pace of growth could peak in 2027. Higher investment is putting pressure on companies’ cash flows and increasing their need for additional funding.
AI spending supports US economic growth
The growing investment in AI infrastructure has become a significant contributor to the US economy. According to UBS, spending on AI infrastructure added around 0.75 percentage points to US gross domestic product (GDP) growth in the first half of 2026.Rising equity prices linked to AI companies have also boosted household wealth and consumption, providing another source of support for economic activity.However, the report found little clear evidence that AI has so far led to a substantial increase in overall productivity or widespread job displacement. Its estimated effect on the overall unemployment rate remains limited, at around 0.2 percentage points or less.The impact on employment has varied across industries. Selected high-technology sectors, including software and computer systems design, recorded a 1.4 per cent year-on-year decline in employment. In contrast, construction industries supporting data centre infrastructure saw employment grow by nearly 3 per cent.
Rising investment puts pressure on cash flows
While demand for AI infrastructure continues to drive investment, UBS has flagged emerging financing pressures among major technology companies. Their cash flows have weakened as spending has increased, while demand for their bond issuances has become less robust.The report said investors expect free cash flow to return to positive territory in 2028, provided companies are able to generate sufficient revenue from AI services.The ability to convert heavy infrastructure spending into sustainable revenue will therefore remain important as the investment cycle progresses.AI demand is also contributing to higher prices in some areas, including software, digital goods and electricity, according to UBS. However, the report noted that productivity gains from AI could help reduce inflation over time.The outlook for the investment cycle will depend on whether demand for computing power continues to exceed available capacity and whether technology companies can turn their growing investments into sustainable revenue growth.
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