The volatility that struck AI-related stocks last week revealed a wider economic risk: AI-related wealth and investment now propel so much growth that a severe decline could take the entire economy with it. According to analysts, in the first half of the year, business investment in AI may have contributed up to half of GDP growth adjusted for inflation. Particularly in recent months, rising AI stocks have also boosted consumer spending and household wealth. “It’s certainly plausible that the economy would already be in a recession” without the AI boom, said Peter Berezin, chief global strategist at BCA Research.
U.S. economy “hooked” on AI spending
Eliminating AI spending weakens economic momentum. This year has seen a slowdown in job creation, an increase in unemployment, and a nearly flat level of private business investment outside of AI categories since 2019, according to Deutsche Bank. The economy is now even more dependent on AI due to a decline in commercial construction outside of data centers, such as shopping centers and office buildings. “It’s the only source of investment right now,” said Stephen Juneau, an economist at Bank of America.
Bank of America estimates that Microsoft, Amazon.com, Alphabet, and Meta Platforms will raise their combined capital expenditures to $344 billion this year, up from $228 billion last year. According to Barclays’ calculations, early in 2025, investments in software, computer hardware, and data centers contributed roughly one percentage point to the annualized GDP growth. Much of that AI spending is driven by chips, which are primarily imported. However, even after deducting imports, Barclays reports that AI investment increased output by an annualized 0.8% in the first half of the year, or half of the GDP growth.
Analysts anticipate that this pattern will persist. Bank of America anticipates that the major AI players will increase capital expenditures to $404 billion next year, while Nvidia recently forecast $65 billion in fourth-quarter sales.
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