AI and the rise of software investment

Artificial intelligence (AI) is an emerging technological innovation in many aspects of production and across many industries. The U.S. Bureau of Labor Statistics (BLS) implicitly captures AI use through its capital measure of software used in production. This article uses data from the BLS productivity program to break down recent investment growth by asset category and, more specifically, to examine recent investment in the software category. Measuring productivity growth is key to understanding how the economy is growing and becoming more efficient. Total factor productivity, which measures the labor and capital used in producing goods and services, increased 1.1 percent from 2019 to 2024. Businesses invest in capital, including computers, machines, buildings, inventories, land, and intellectual property (software, research and development, and artistic originals, like music and art). These investments find their way to new technologies and improved production methods.