IMF says AI slowdown could knock 0.4pc off global GDP by 2028

Global GDP measures the world’s overall economic output. If an AI slowdown reduces global GDP, it means weaker AI investment would leave worldwide production, income, and spending lower than they otherwise would be. The effect would spread beyond technology companies because AI investment supports wider economic activity.

The mechanism begins with spending on data centres and microchips. That spending creates demand for equipment, construction, energy, finance, and international trade. If investors lose confidence, projects may be delayed or cancelled. Companies connected to AI could then face lower revenues, weaker profits, and falling share prices.

The IMF estimates that a decline in AI investment could reduce global GDP by 0.4 per cent by 2028. The figure describes a potential worldwide shortfall, not a fall in every country by exactly 0.4 per cent. It shows why officials view AI as both a growth engine and a possible source of economic risk.

A 0.4 per cent fall in global GDP represents a reduction in the world’s total economic output compared with what would otherwise be expected. GDP includes the value of goods and services produced across economies. Because the article gives no global GDP dollar total, the percentage cannot be converted into a precise amount from the supplied information.

The IMF links this potential decline to weaker or less durable AI investment and profitability. Data centres, microchips, and related projects currently generate demand across borders. If that spending fades, suppliers, investors, workers, and trading partners could all experience less activity. The resulting effect would be broader than the AI sector alone.

The projection is for 2028 and describes a possible outcome, not a reported result. It signals a risk to global growth if confidence in AI weakens. The IMF also warns that weaker investment could trigger a market correction, adding financial pressure to the economic slowdown.

AI investment has become a major source of global demand. Companies are spending heavily on data centres, microchips, and other AI-related products. That spending supports production and trade across multiple economies. It has also helped offset some economic damage from rising global energy prices caused by the war in the Middle East.

The clearest example is the IMF’s estimate for trade between 2023 and 2025. Global trade rose 8.3 per cent during that period. IMF chief economist Silvana Tenreyro said growth would have been closer to 4.6 per cent without AI-related products. The difference shows how strongly AI goods contributed to cross-border commerce.

Officials now see AI in GDP, stock markets, and bond markets. Bank of Canada Governor Tiff Macklem called it widespread and said the current period was only the beginning. However, the IMF and other economists warn that this support could reverse if investment or confidence weakens.

The AI boom is being powered especially by spending on data centres and microchips. Data centres are the facilities that support AI computing, while microchips are the physical components needed to process information. Their importance comes from the large investment required to build and supply this technology.

The article connects this spending directly to global growth and trade. Building data centres creates demand for equipment, construction, power, and related services. Producing and shipping microchips connects several economies through supply chains. These purchases also form part of the AI-related products that helped global trade rise 8.3 per cent between 2023 and 2025.

This spending is powerful but creates exposure. If investors doubt AI’s future profits, they may slow or cancel projects. The IMF warns that weaker or less durable AI investment could trigger a market correction and reduce global GDP by 0.4 per cent by 2028.

Investor confidence matters because the AI boom depends heavily on continued spending and expectations of future profitability. If confidence fades, investors may withdraw money from AI-related companies and projects. That could reduce funding, delay expansion, and weaken the economic activity currently linked to the technology.

The article describes several possible effects. The IMF says weaker AI investment or profitability could trigger a market correction. Stock prices could fall, while companies might see lower valuations and more difficult financing. Because AI appears in GDP, stock markets, and bond markets, the consequences could move through several parts of the financial system.

IMF chief Kristalina Georgieva warned that money running away from AI could create financial stability risks. The IMF also projects a possible 0.4 per cent reduction in global GDP by 2028. The outcome depends on confidence, investment durability, profitability, and the wider economic environment.

AI businesses require large investments, so their profitability depends on costs, financing, and future demand. Higher energy prices raise operating costs, while higher interest rates make borrowing and investment more expensive. Tighter financial conditions can therefore weaken the business case for data centres, microchips, and related projects.

Moody’s Analytics warned that a prolonged Middle East conflict could puncture the AI boom. Their mechanism is direct: the conflict could push energy prices higher and financial conditions tighter. Rising operating costs and interest rates would add to doubts about whether AI business models can remain profitable and viable over the long term.

Regulation creates a different form of uncertainty. Some industry participants want legislation to reduce risks, while leaders including Donald Trump have urged limited government regulation. Kristalina Georgieva said that without safeguards, risks may exceed opportunities. Uncertainty over future rules could therefore affect investment decisions and confidence.

A technology can affect the world economy when its production and financing involve many countries. AI investment creates demand for data centres, microchips, energy, construction, transport, and financial services. These connections turn a technology boom into wider economic growth and international trade.

The article offers a measurable example. Global trade rose 8.3 per cent between 2023 and 2025, but IMF chief economist Silvana Tenreyro said it would have been closer to 4.6 per cent without AI-related products. This shows how AI demand supports companies and suppliers beyond the technology sector itself.

The same connections can transmit weakness. If AI investment slows, suppliers may lose orders, markets may correct, and financing may tighten. The IMF projects a possible 0.4 per cent reduction in global GDP by 2028. A prolonged war or uncertain regulation could make that risk more serious by damaging costs or confidence.