A PIMCO report finds that massive investments in AI, defence, and energy security will reshape the global economy over the next five years, creating a wide range of outcomes for growth, inflation, and asset returns.
Massive investments in artificial intelligence (AI), defence and energy security are set to reshape the global economic landscape over the next five years, creating a wide range of possible outcomes for growth, inflation and asset returns, according to a report by global investment manager PIMCO.
In its latest Secular Outlook 2026 titled "Rupture and Resilience", PIMCO said the world economy is entering a period marked by geopolitical fragmentation, fiscal constraints and an unprecedented capital expenditure cycle driven by AI infrastructure development.
AI Boom and Macroeconomic Impact
The report noted that the combination of AI investments, rising defence spending and energy security initiatives could significantly alter global growth dynamics. According to PIMCO, "The AI investment boom, rising defense spending, and energy security investments could add up to $14 trillion to global capital spending over the next five years."
The firm believes AI has moved beyond being a future possibility and is already becoming a major macroeconomic force. Investment in data centres, computing power and energy infrastructure is driving demand across sectors, while productivity gains from AI could eventually help ease inflationary pressures.
Uneven Gains and Geopolitical Risks
However, the report cautioned that the benefits of AI will not be distributed evenly. Instead, the technology is expected to widen differences across companies, industries and countries, creating both winners and losers.
At the same time, geopolitical tensions, trade fragmentation and supply chain restructuring continue to pose inflationary and growth risks.
Highlighting the scale of the transformation underway, the report stated, "Artificial intelligence has crossed a threshold. AI investment is now large enough to drive macroeconomic activity."
Investment Outlook and Strategy
Against this backdrop, PIMCO expects investors to face a much broader range of potential economic outcomes than in previous years. While AI-driven productivity gains could prove strongly disinflationary, geopolitical shocks and disruptions to trade and energy flows may generate upward pressure on prices.
Emphasising the importance of resilience over risk-taking, the report noted, "We believe resilient portfolios today are built around liquid, high-quality fixed income, an up-in-quality bias in credit, broad global diversification, and selective exposure to real assets and asset-based finance."
According to PIMCO, in a world characterised by geopolitical rupture, widening economic dispersion and a massive AI-driven investment cycle, disciplined allocation towards diversified, high-quality fixed income and credit strategies may offer investors the most reliable path to navigate uncertainty while capturing long-term opportunities.
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