Debt now moving to centre of AI boom

Nick Beams

There is now widespread recognition that the artificial intelligence (AI) boom, which has powered Wall Street to record highs, has taken a significant turn with major implications for financial markets and possibly the entire economy.

When the AI boom began at the end of 2022 with the release by OpenAI of ChatGPT, it was chiefly financed through the massive cash flows of the so-called “hyperscalers” such as Google, Microsoft, Meta and Amazon, together with the chip-making firm Nvidia.

A Nvidia office building in Santa Clara, Calif., May 31, 2023. Jeff Chiu [AP Photo/Jeff Chiu]

Little debt was involved. But in what is increasingly becoming a war as major tech giants strive to place themselves in the best position, this is now changing and debt must be increasingly used to finance AI development.

In a recent article, Sydney Morning Herald economics columnist Stephen Bartholomeusz pointed to the significance of the shift.

“Until now, questioning of the boom in investment in artificial intelligence has largely been confined to whether it constitutes a stock market bubble. Increasingly, the conversation will shift to whether that boom represents a threat to financial system stability,” he wrote.

Massive amounts of money are involved. According to the global management consulting firm McKinsey, some $5.2 trillion will be needed by 2030 to finance the building of the data centres which are needed to develop the computing power for AI. This amount is equivalent to three times the annual GDP of Australia.

Morgan Stanley estimates that between this year and 2028 the capital spending on AI infrastructure will be $2.9 trillion, of which $1.5 trillion will be financed externally, including $800 billion from private credit sources.

Apart from the money involved, the scale of AI data centres is indicated by their power consumption. The International Energy Agency has estimated that electricity demand from AI data centres worldwide will more than double by 2030 and reach a level higher than the electricity consumption of Japan, the world’s fourth-largest economy.

Last month, OpenAI announced plans for a major data centre in Michigan which, according to a report in the Financial Times, will consume as much electricity as 44.2 million households. Other operations are on the same scale.

Another expression of their extent is revealed by the estimate that an increase of just 1 cent per kilowatt hour for a company using 50 megawatts annually would be around $4.4 million.

There are an increasing number of concerns being raised about the potential triggers for the collapse of the AI boom and its consequences.

The most obvious one is the enormous gulf between the spending on infrastructure and the revenue being generated. OpenAI has signed deals amounting to $1.5 trillion, but its revenue for this year is expected to be just $20 billion. If it is going to go anywhere near meeting its commitments to acquire chips, then that will have to be raised to the hundreds of billions of dollars.

Summing up the overall situation, a recent article in the Wall Street Journal noted that chief among the “real reasons” to be concerned about the sustainability of the boom “is that there is far more AI computing infrastructure spending than there is AI revenue, a gulf that is widening by the day.”

The business consulting firm Bain has estimated that $2 trillion in revenue will be required by 2030 to sustain the investments that have been made, compared to $253 billion in 2024.

Another issue is the short life cycle of chips, which can be as little as three years. This means that the value of the asset backing of the massive loans used to finance the data centre will be rapidly depreciated as they become redundant, requiring new expenditures to remain competitive.

In a blog post issued last month, the Bank of England said there was a range of developments that could trigger a re-evaluation of future revenues and AI asset prices.

These included but were not limited to “underwhelming speed of AI capability progress in user adoption of AI, or below-expectation ability of AI companies to monetize the users of their AI applications” with the speed of AI progress and impact “highly uncertain.”

For companies that depend on massive computation capacity to run their AI models, “algorithmic breakthrough or other event which challenges that paradigm could cause a significant re-evaluation of asset prices.”

As an example, it cited the introduction of a new model by the Chinese start-up firm DeepSeek in January at a lower cost and with a more efficient use of computing power, which triggered a fall in the stock price of AI companies in the US.

A re-evaluation of asset prices means a re-evaluation of the debt structure which has been used to finance them, with the potential to cause problems for the lenders, to which the BoE blog pointed.

“If the projected scale of debt-financed AI and associated energy infrastructure investments materializes over this decade, financial stability risks are likely to grow. Banks would be exposed to this directly through their credit exposures to AI companies, as well as indirectly through their provision of loans and credit facilities to private credit funds and other financial institutions which are exposed to AI-impacted asset prices.”

In his comment piece, which we cited previously, Bartholomeusz said that for the moment “discussions about an AI bubble are largely confined to the share market and to the paper losses that would flow if it burst.”

In such discussions, the comparison is often made with the bursting of the dot-com bubble at the start of the century which, while it had a major impact on the companies involved, did not spark a broader financial crisis or a deep recession.

Such reassurances, however, are entirely misplaced because of the major transformations in the US financial system and economy over the past quarter-century, above all the expansion of debt. In 2000, total US debt, public and private, was $28.64 trillion. It was $102.21 trillion at the end of last year.

The Bank of England warned that a fall in AI-related assets could adversely impact US growth under conditions where AI investment “has been an outsized driver of US GDP growth in the first half of 2025.” It noted that while the collapse of the dot-com bubble did contribute to a mild recession, a “fall in AI-related asset prices would happen in a significantly different macroeconomic context to the early 2000s.”

According to calculations by former International Monetary Fund leading economist Gita Gopinath, a collapse in the AI market equivalent to the bursting of the dot-com bubble would cause US investors to lose $20 trillion, an amount equivalent to 70 percent of American GDP, and deliver a $15 trillion hit to the rest of the world, equivalent to 20 percent of its GDP.

Given the growing involvement of the banks and finance capital more broadly in the AI boom, and the ever-increasing role of debt in funding historically unprecedented levels of capital spending as each of the tech giants seeks to dominate AI, such a development would signify not just the bursting of a bubble but potentially a collapse of the entire financial system.

That prospect, looming ever larger, which would go far beyond the devastation resulting from the financial crisis of 2008, has far-reaching political implications.

There is no doubt that the rationally planned, conscious and democratically controlled development of AI would provide for an advance of humanity in the economy and so many other areas of social life.

However, AI is not being advanced in such a manner but within the social relations of capitalism, based on the private ownership of the means of production and finance subject to the anarchy of the market and the striving of corporate giants for profit.

The process now unfolding recalls the central thesis of the founder of scientific socialism, Karl Marx, when he explained that the objective possibility, indeed necessity, for the socialist transformation of society arose when “the material productive forces of society come into conflict with the existing relations of production.”

That contradiction is now assuming an acute form. AI, which could provide enormous economic advances for the mass of humanity, is already being used as a battering ram against the working class in the form of mass layoffs and the intensification of exploitation.

Aid Cuts: The Cost Of Indifference

Graham Peebles

Image by Ian Borg.

It is a stark reflection of our world, its prevailing values and ideals, that leaders of some of the richest nations invest billions in instruments of death and destruction, while ignoring the basic needs of the poorest people on Earth.

At its best, Overseas Development Aid (ODA) is a demonstration of collective compassion — an act of sharing; a manifestation of that simple yet profound Christian injunction: “You shall love your neighbour as yourself” (Mark 12:31). A commandment that challenges the false belief in separation, pointing instead to the deeper reality of oneness.

ODA has never been sufficient to meet the needs of people living in formerly colonised nations — primarily in sub-Saharan Africa, but also in parts of Asia, South America, and elsewhere. And now, the world’s major donors — the United States, by far the largest contributor with roughly 30% of global ODA, followed by Germany (17%) and the United Kingdom (7.5%) — are cutting even that inadequate amount.

Combined, these three nations provide more than half of all global aid (around 54.5%). Other wealthy states, including France, the Netherlands, and Belgium, have followed the U.S. lead and reduced their contributions to overseas development programmes.

Since Trump imposed a 90-day freeze on all U.S. overseas aid in January, the USAID budget has been slashed — with an estimated 83% of recipient programmes cut or suspended. U.S. Secretary of State Marco Rubio announced that “approximately 5,200 of USAID’s 6,200 programmes are being terminated, with only about 18% remaining to be transferred to the State Department.

The consequences of these draconian measures for humanitarian aid operations worldwide are severe.

According to a report published in The Lancet, 14 million people will die by 2030 as a consequence of the unprecedented cuts — 4.5 million of whom are children under the age of five.

Calculated suffering

The impact of these massive cuts has been devastating, both on specific programmes and across the United Nations system. The UN has warned that it is now “facing the most severe funding shortfall in the history of humanitarian aid” — due in large measure to the actions of President Trump — who makes no secret of his contempt for the UN. The consequences have been both immediate and catastrophic.

The World Food Programme (WFP) has been forced to scale back its lifesaving operations across sub-Saharan Africa, leaving an estimated 14 million people at risk of malnutrition and starvation. WFP Executive Director Cindy McCain said, “Every ration cut means a child goes to bed hungry, a mother skips a meal, or a family loses the support they need to survive.”

The UN Children’s Fund (UNICEF) projects a 20% drop in income, threatening education programs, as well as immunisation, child protection and nutrition services.

The UN Office for the Coordination of Humanitarian Affairs (OCHA) — responsible for emergency appeals — faces “a shortfall of $58 million, after its largest donor, the United States, cut funding.

The International Organization for Migration (IOM) expects a 30% fall in donor funding, reducing assistance for displaced people and forcing cuts in camp management and essential services such as water and sanitation.

The World Health Organization (WHO) has lost an estimated $1 billion, severely undermining its ability to manage disease outbreaks, maintain vaccination programmes, and respond to health emergencies.

Thousands of individual programmes supporting the poorest and most vulnerable people on Earth are being reduced or cancelled, affecting initiatives in a number of nations. In Yemen, desperately needed women’s shelters and community clinics funded by the U.S. and UK have closed. In Afghanistan, hundreds of health centres supported by WHO and WFP have stopped operating, leaving millions without access to even the most basic medical care.

An estimated five million people in Sudan are losing access to essential aid provided by OCHA and UNHCR. Nearly four million Ethiopians risk losing food assistance through WFP’s malnutrition programmes. In Uganda, around one million refugees — half the country’s total — have lost all food rations. Across Chad, the Central Sahel, Nigeria, Rwanda, Kenya, Djibouti, and South Sudan, the same pattern of collapse is unfolding, the result of these unprecedented and profoundly inhumane cuts.

As Tom Fletcher, UN Under-Secretary-General for Humanitarian Affairs and Emergency Relief Coordinator, said, “Brutal funding cuts leave us with brutal choices. All we ask is one per cent of what you chose to spend last year on war.”

To put this in perspective, while the US plans to spend $832–850 billion on its military in 2025, funding for life-saving aid programmes that protect millions of children and families is slashed — to less than 5% of this colossal sum; a stark reflection of the moral bankruptcy and perverse values of those in power.

“But this isn’t just an appeal for money,” Fletcher continued — “it’s a call for global responsibility, for human solidarity, for a commitment to end the suffering.”

In this piercing statement, Fletcher identifies the very crux of the matter: the decisions to reduce ODA are political choices, not economic necessities. In fact, they are moral judgments, reflecting what ideologically market-driven governments deem important, and, by contrast, what they consider expendable.

War and militarism are funded without question — and in many cases see their budgets increase — while human welfare is totally neglected, relegated to the margins, and reduced to little more than an afterthought.

Collective abuse

This attitude of neglect has deep historical roots, reflecting a worldview that assigns value to human beings based on wealth, status, and race, while prioritising the demands of capital — for profit — over the most basic needs of people and the health of the planet. It is a legacy of exploitation and violence.

Withholding aid from the most vulnerable people in the world — many of whom are women and children — in nations either rendered poor by direct Western interventions or kept impoverished through measures imposed via structural adjustment programmes (SAPs) is a form of collective abuse.

It is more about justice — or rather, injustice — than about aid. It reflects the cruelty of a socio-economic system that is inherently inhumane, one that has bred extreme inequality.

Inequality, in its myriad forms, is itself an injustice — one now reaching levels that threaten the structural integrity of societies: the extreme concentrations of wealth and, with them, privilege and power. The brutal injustice of grinding poverty, malnutrition, and starvation in a world overflowing with food; the injustice of denied opportunity, of lack of access to good-quality health care and education — or, in some cases, to any access at all.

And on and on it goes: in all areas of contemporary life — from the distribution of natural resources, including water and food, to access to the arts, and all points in between — we find the poison of injustice.

And as long as injustice persists, there will never be social harmony, and there will never be peace.

The choice is clear

Throughout the world, humanity faces a fundamental choice: the path of division and hate — promoted by leaders like Trump and far-right bigots everywhere — or the path of sharing, cooperation, and unity. These two alternatives, evident for generations, are now more sharply defined than ever.

For the vast majority of people, the humane way — the way of kindness, cooperation, and brotherhood — is what they long for. Yet a powerful and persuasive rhetoric of hate, spread by reactionary forces, is actively working to deny that reality. Paradoxically perhaps, this rhetoric finds fertile ground precisely because of decades of social injustice.

The far right prospers in environments of widespread economic hardship, misery, and resentment — blaming foreigners and minority groups, and offering simplistic (often unworkable) solutions to complex problems.

The cuts to ODA flow from this hateful source; they are a cruel example of the kind of world being promoted by the voices of extremism — a divided world devoid of compassion and tolerance.

In order to transition through this time of tension and cast aside the forces of division for once and for all, we must recognise that justice is universal — that, if it is denied to anyone, we all suffer. As a wise man once said, “The suffering of the many is the illness of the whole…justice alone will provide the cure.”

The choice to share the world’s resources and national wealth more equitably reaches far beyond the sordid realm of politics. It is a moral and spiritual question – one that goes to the very heart of who we are as human beings and the kind of world we wish to live in.

Humanity is one; the world is one. The creation of two worlds — one for the rich and powerful, and another for the poor, the exploited, and the marginalised — is an affront to that truth, a betrayal of the principle of our shared existence. If humanity is to survive, and everyone everywhere, be given the opportunity to flourish, this false division must end.

Sharing — of which ODA is a primary expression — is the basic requirement to bring this about; sharing creates justice, cultivates trust, and encourages cooperation. These ideals of living, or Principles of Goodness, are not trite platitudes; they are the essential foundations upon which a peaceful and sustainable world can be built. Without them, further division and conflict are inevitable.

Turkish President Erdoğan's rival İmamoğlu faces up to 2,400 years in jail

Barış Demir & Ulaş Sevinç

The indictment in the “corruption” investigation, in which Istanbul Metropolitan Municipality (İBB) Mayor and Republican People’s Party (CHP) presidential candidate Ekrem İmamoğlu has been arrested since March, was finalised Tuesday.

The CHP won the most votes nationwide in the 2024 local elections. But the charges in the indictment portray its municipal work, election activities, and presidential candidate as criminal.

Ekrem Imamoglu, Mayor of Istanbul Metropolitan Municipality, giving a speech in front of Istanbul Palace of Justice on January 31, 2025 [Photo: X / @ekrem_imamoglu]

Increasing pressure on the CHP through the judiciary occupies an important place in the agenda of President Recep Tayyip Erdoğan’s government to eliminate fundamental democratic rights, including the right to vote and be elected, the right to a fair trial, freedom of the press and expression, as he builds a presidential dictatorship. However, this authoritarian regime, built not in the interests of one person but of the ruling class, primarily targets the working class amid growing class tensions and social inequality.

The 3,900-page indictment named 402 people as “suspects,” 105 of whom are prisoners. İmamoğlu faces charges for 142 offenses, with sentences ranging from 828 to 2,430 years in prison.

The Istanbul Chief Public Prosecutor’s Office alleges that İmamoğlu established and led a “criminal organization.” The allegations date back to 2014, when he was elected mayor of Beylikdüzü district. All the accused are charged with establishing and managing a criminal organization, bribery, laundering criminal proceeds, fraud against public institutions and organizations, bid rigging, and other crimes. The indictment alleges that the accused caused 160 billion Turkish lira (approximately US$3.8 billion) in financial damages to the state and the loss of an additional $24 million in foreign funds. In addition, the prosecution said it had identified 95 real estate properties suspected of being linked to the case.

In the section titled “purpose of the organization” in the indictment, the prosecution states that İmamoğlu’s primary and initial goal was financial enrichment; his second goal was to take over the CHP with the financial capital he acquired; and his third goal was to become the CHP’s candidate in the presidential elections.

The prosecutor’s office notified the Supreme Court of Appeals Prosecutor’s Office, requesting that “necessary action be taken” in accordance with the provisions on the closure of political parties within the scope of the indictment.

İmamoğlu denied the allegations in a statement posted on his X account, saying: “The issue has gone beyond the alleged corruption and bribery slander and has become an attack on the CHP, the founder of our Republic... The indictment you wrote consists of lies that threaten people, hold them hostage, and coerce them into making false accusations under pressure... Broadcast the trial live so everyone can see your lies and slander!”

CHP leader Özgür Özel said on X, “This time, the coup plotters didn’t come with tanks or combat boots, but with judicial robes... This case is not judicial, it is entirely political. Its purpose is to stop the Republican People’s Party, the leading party in the last elections, and to prevent its presidential candidate from running.”

Özel stated that the notification submitted to the Supreme Court Chief Prosecutor’s Office to file a closure case against his party was “proof that the matter was not a [corruption] investigation targeting the Istanbul Metropolitan Municipality”. He added, “What happened today is a clear case of judicial interference in democratic politics and the results of future elections.”

The Constitutional Court in Turkey has a long record of closing down left-wing parties, particularly Kurdish political parties. However, in 2008, Erdoğan’s Justice and Development Party (AKP) also faced a closure case on the grounds of “actions contrary to secularism.” The AKP was not closed because a qualified majority could not be achieved in the court members’ vote (six in favor, five against). The most recent Kurdish political party to be closed was the Democratic Society Party (DTP) in 2009, accused of having links to the illegal Kurdistan Workers’ Party (PKK).

In Turkey, municipalities serve as an important steppingstone for bourgeois politicians in terms of enrichment and political career advancement. Erdoğan’s political career took off with his position as mayor of Istanbul. However, the aim of the İmamoğlu case is not to “fight corruption.” In this investigation, alongside normal municipal activities, the tender and rent seeking processes found in every municipality are being selectively evaluated and combined with fabricated allegations.

Thus, while the results of elections in which millions of people participated are being discredited, the change in CHP leadership during the congress process, running for president, and conducting normal election campaigns are being portrayed as crimes. İmamoğlu’s imprisonment and designation as the leader of a “criminal organization” essentially stems from his status as Erdoğan’s main political rival.

The Erdoğan government’s construction of a presidential dictatorship has gained momentum amid the genocide in Gaza, attacks by US and Israel targeting Iran and its allies in the Middle East, NATO’s war against Russia in Ukraine, and the implementation of a harsh austerity program against the working class at home.

This judicial operation, while directly targeting the CHP and İmamoğlu, is fueled by the same processes driving ruling classes globally toward authoritarianism and the far-right. As ruling elites around the world, particularly in imperialist centers, seek an escape from the deepening economic, social, and political crisis of the capitalist system, they are turning to war both abroad and at home. Amid massive social inequality and discontent, they require dictatorship to implement militarist and austerity programs to protect their power and wealth.

This process has accelerated even further with Trump, who returned to the White House in the US and is attempted to establish a presidential dictatorship. İmamoğlu’s arrest took place three days after Trump and Erdoğan’s phone call on March 16.

In the weeks before the indictment was finalized, German Chancellor Friedrich Merz and British Prime Minister Keir Starmer visited Erdoğan. Their agenda did not focus on the escalation of attacks on democratic rights in Turkey, but rather on increasing military cooperation with Erdoğan.

The open or tacit approval of these imperialist powers for the increasing pressure exerted by Erdoğan on the CHP, a pro-NATO party, is closely linked to their growing cooperation with Turkey in the Middle East. This includes Ankara’s complicity in the Gaza “peace” agreement. However, it is not only Trump but also the major European powers who are pursuing the establishment of dictatorial regimes similar to that in Turkey against the working class in their own countries.

The CHP’s response to the support given to Erdoğan by major NATO leaders consists of complaining and trying to prove that it would be a better ally than the AKP. A recent report submitted by the CHP to NATO was fully in line with the US’s anti-China, anti-Russia, and anti-Iran stance and backed Washington’s “new Middle East” project.

As a pro-imperialist party defending the interests of the same ruling class behind the construction of the dictatorial regime, the CHP is inherently incapable of defending democratic rights. The Erdoğan government’s reckless escalation of attacks on democratic rights has been facilitated by the CHP’s efforts to end the mass movement that erupted in March and reach a compromise with the government. Like Erdoğan, the CHP fears the eruption of an independent working-class movement that could threaten the rotten social and political system.

On the other hand, the judicial operation against the CHP and the increasing attacks on democratic rights expose the falseness of the claim that negotiations between the government and the PKK will bring “peace and democracy.” It reveals the role of pseudo-left parties that participated in the parliamentary commission established to make these claims acceptable to the public or that supported these negotiations.