The current AI boom prompts significant investment, which necessitates diverting resources from other areas. Goldman Sachs economists observe this crowding out effect, albeit to a lesser extent than commonly perceived. This phenomenon manifests as a displacement of other technology investments and construction projects. Furthermore, it contributes to increased corporate borrowing costs.AI investments are projected to reach approximately $600 billion this year, representing 2% of GDP. This accounts for a substantial portion of business and equipment fixed investment. One identified crowding-out mechanism involves hyperscalers and AI service consumers reducing their spending on other technologies. For instance, increased AI token costs may lead to cuts in other software and tech expenditures.The surge in data center construction also diverts construction labor and equipment away from other building activities. Higher profit margins on data center construction incentivize companies to prioritize these projects. The immense capital demands of hyperscalers have fueled a rise in AI-related debt issuance. Consequently, the broader corporate sector experiences higher borrowing costs, potentially curtailing their investment plans. However, the impact on borrowing costs and non-AI investment has been relatively limited thus far. Overall, both the significant contribution of AI to GDP growth and its extensive crowding out of other activities are considered exaggerated.