I’ve been thinking about the current AI investment wave through the lens of George Soros’ theory of reflexivity, and it feels surprisingly relevant.
Quick refresher: Soros argues that in social systems like markets, people’s beliefs don’t just reflect reality. They shape it. Expectations influence actions, actions change outcomes, and those outcomes then reinforce the original expectations. This can create self-reinforcing booms and busts.
Now consider this:
• AI-related capital spending topped $300B this year, mostly for data centers
• Companies are planning facilities the size of small towns with massive energy needs
• McKinsey projects up to $5.2T in AI infrastructure spending by 2030
• According to Jason Furman, nearly all U.S. GDP growth in H1 2025 came from AI and data centers
From a reflexivity perspective, this isn’t just investment responding to demand. It is investment creating the fundamentals.
The belief that AI is a once-in-a-generation general-purpose technology is driving enormous capital allocation. That spending boosts GDP, construction, energy demand, and valuations, which then gets cited as proof that the belief was correct. The narrative validates itself.
That’s the positive feedback loop.
The question isn’t “Is AI real?” It clearly is. The reflexive risk is whether expected future demand grows fast enough to justify capacity being built today. Reflexive booms don’t fail because demand disappears. They fail when demand grows more slowly than capital commitments.
What makes this especially interesting, and concerning, is how concentrated growth appears to be. If AI and data centers are responsible for most marginal GDP growth, then a slowdown in that capex cycle doesn’t just hit tech. It hits the broader economy.
Soros’ point is not that these booms are irrational, but that they are inherently unstable. The same feedback loop that amplifies growth on the way up can accelerate contraction if expectations shift due to pricing pressure, energy constraints, regulation, or faster-than-expected efficiency gains.