Billionaire investor Bill Ackman said the Federal Reserve may have made a mistake by raising its benchmark rate by 25 basis points to 3.75%-4.00%, arguing that the current AI investment boom is changing how monetary policy works. In his view, the race among major technology companies to build data centers and buy computing power could keep capital spending elevated even as financing costs rise, reducing the usual impact of higher rates on business investment. Ackman also said higher interest costs can move through supply chains and pricing, adding pressure to goods and services inflation rather than cooling it as intended. Data cited from Bridgewater show Alphabet, Amazon, Meta and Microsoft are expected to spend at least $650 billion on AI-related investment this year. Gartner projects global AI spending will reach $2.7 trillion in 2026, up 49.5% year over year. Moody's Analytics chief economist Mark Zandi had also said a Fed hike at this point could be "a mistake," warning that bringing inflation back to the Fed's 2% target may require slowing the AI investment boom or putting more pressure on other parts of the economy. Market pricing still points to more tightening, with CME FedWatch showing roughly a 64% implied probability of an October hike in 30-day federal funds futures.
Bill Ackman said on Sept. 28 that the Federal Reserve may have erred by lifting its benchmark interest rate by 25 basis points to 3.75%-4.00%.
Ackman says AI capex is changing the usual policy channel
The billionaire investor argued that the AI arms race is pushing large technology companies to keep increasing capital spending. Even with higher financing costs, companies may still move ahead with data center construction and computing infrastructure purchases, which in his view weakens the traditional effect of rate hikes on investment demand.
Ackman also said higher interest expenses can pass through supply chains and pricing mechanisms into the prices of goods and services, adding to inflation pressure. He said the current AI investment surge may be changing how traditional monetary policy is transmitted through the economy.
Bridgewater and Gartner figures point to large spending totals
According to Bridgewater data, Alphabet, Amazon, Meta and Microsoft are expected to spend at least $650 billion on AI-related investment this year. Gartner estimates global AI spending will reach $2.7 trillion in 2026, representing 49.5% year-over-year growth.
Moody's Analytics chief economist Mark Zandi had previously made a similar point, saying a Fed rate increase at this stage could be "a mistake." He warned that if the central bank wants to push inflation back down to its 2% target, it may need to curb the AI investment boom or place more pressure on other parts of the economy.
Markets still price in another hike
U.S. inflation remains above the Federal Reserve's 2% target, and markets are still pricing in additional tightening. CME FedWatch data show that 30-day federal funds futures imply roughly a 64% probability of an October rate hike.
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