AI Costs: Franklin Templeton Foresees Economic Slowdown

It certainly seems so, at least according to Jenny Johnson, CEO of Franklin Templeton Investments. She explained that the rising cost of capital is putting the brakes on various economic activities, mainly due to the artificial intelligence race. Essentially, AI has an insatiable thirst for money.

This thirst translates into gigantic investments to build the necessary infrastructure, from servers to data centers. All this demand for money drives up the cost of capital, making loans and investments more expensive. Johnson discussed these issues with Bloomberg's Guy Johnson at the IPEM Global conference in Paris, France.

Private credit, that pool of financing outside traditional banks, is one of the first to feel the pinch. If money costs more, even those funding private companies think twice. This means less liquidity for startups or companies looking to grow, especially those focused on AI.

Jenny Johnson, President and CEO at Franklin Templeton Investments, stated that the AI buildout is having a significant impact on private credit and the US economy. In short, AI is a powerful engine, but it has terrifying fuel consumption. And that fuel, capital, is becoming a luxury for many.