AI productivity payoff may take years, Deutsche Bank economist warns
Jim Reid says AI could lift growth over time, but delayed returns may strain markets and countries with heavy debt burdens.
By Daniel Okafor · Business Editor
3 min read
Deutsche Bank Research Institute economist Jim Reid said artificial intelligence is likely to need years before it produces broad productivity gains across the economy. The timing matters because investors and governments are already counting on AI-led growth, while Reid warned that disappointment could worsen pressure from high debt levels.
Reid, Deutsche Bank Research Institute’s global head of macro and thematic research, told Bloomberg Television on Tuesday that AI has unusual potential to lift productivity. He said the technology still has to be built into companies’ operations before the wider economy can see the benefits.
Reid said he expects AI to create jobs and make workplaces more efficient, according to Bloomberg Television. His caution centered on timing: businesses may need years to turn new tools into measurable gains.
Early data shows limited broad impact
Several indicators cited by economists show little evidence so far that AI has reshaped the labor market or corporate earnings outside major technology companies. The Yale Budget Lab said last month that it had not found significant changes in job mix or unemployment duration for occupations with high exposure to AI, and said it found no evidence of AI-related labor-market disruption.
Apollo Global Management chief economist Torsten Slok pointed to Bloomberg and Macrobond data in a recent blog post showing a split between the largest technology companies and the rest of the market. Slok said profit margins for the Magnificent Seven rose from about 15% to 25% between the first quarter of 2023 and the first quarter of 2026, while margins for the rest of the S&P 500 stayed near 10% during that period.
Slok said the numbers suggest large tech companies have been better able to use new technology in their own operations, while other sectors have moved more slowly. He warned that investors may face a “painful repricing” if expectations for AI earnings move faster than companies’ ability to earn returns from AI spending.
Slok wrote that a gap between today’s profit expectations and the time companies need to generate returns on AI investments could affect valuations for many AI-related businesses.
Debt risks could rise if AI falls short
Reid said he shares the concern that markets may be pricing in benefits before they arrive. He also said AI will likely add to inflation in the short and medium term, according to Deutsche Bank commentary cited in the report.
Reid linked the issue to sovereign debt, saying many countries already face debt paths that are difficult to sustain. In his view, the optimistic case is that AI creates enough productivity growth to help economies grow into their debt burdens; the negative case is that higher long-term interest rates make those debts harder to manage.
Reid also referred to work published last year by the Federal Reserve Bank of Dallas that laid out three possible AI outcomes: a modest GDP lift from productivity gains, a surge in productivity if AI reaches capabilities beyond humans, or human extinction tied to an AI singularity.
Despite the risks, Reid said he remains positive about AI’s eventual economic effect. He pointed to more than three centuries of industrial change and said new technologies have repeatedly raised fears about job losses without eliminating employment in the aggregate.
This story draws on original reporting from Fortune.