AI investment has not only dominated the equity landscape, but it has also become one of the few forces actively supporting the U.S. economy. In the first half of 2025, technology investment accounted for nearly half of the annual GDP growth, offsetting mounting pressures from trade uncertainty and shifting policy.
While consumer spending remains the primary driver of growth, AI's rapidly expanding role carries significant implications for investors. AI-driven productivity and economic gains could amplify the U.S. stock market rally, extending gains from a handful of dominant AI enablers to a broader group of AI adopters. But that momentum cuts both ways: any pullback in AI investment from major tech firms, or earnings that fail to justify the surge in spending, could quickly heighten economic risks.
After a year fueled by enthusiasm and accelerating innovation, markets may soon shift their attention from AI-powered optimism to the more challenging question of whether growth can be sustained into 2026.
Despite a cooling economy, the U.S. has shown resilience against various policy shocks this year, and current GDP forecasts predict trend growth in the U.S. economy through 2026 despite ongoing challenges, which has helped underpin equity markets.
Since the Federal Reserve began tightening in spring 2022, the S&P 500 has posted strong returns, buoyed by solid earnings and multiple expansion. The lion’s share of the S&P 500’s strength, however, is largely attributed to the “Magnificent 7” tech giants, which have consistently reported strong earnings despite the broader economy facing headwinds. Their performance has provided a safety net for the broader index during times of volatility.
These companies, already leaders before the AI boom, have intensified their investments in AI infrastructure—including data centers, hardware, software, and large model development—to maintain their edge in the AI-driven technology revolution. This investment surge is expected to create new revenue opportunities and enhance profitability.
In essence, what began as a notable equity trend is evolving into a broader economic narrative. With projections indicating that AI-related capital expenditures will reach approximately $1.3 trillion over the next five years, AI is poised to translate capital investments into increased productivity and economic growth across the entire economy.
Though the government does not track AI investments separately, its significant impact on the economy is clear. From data center construction to spending on software and hardware, the recent surge in investment has bolstered the economy amid macroeconomic uncertainties.
AI capital expenditures contributed nearly one percentage point—almost half— to the 2.1% year-on-year growth in GDP during the first half of 2025. This suggests that without the recent wave of tech spending, the economy could have faced a more imminent recession. Even the slowdown in private investment, linked to tariff uncertainties, failed to restrain economic momentum, thanks in large part to AI-related tech investment. More importantly, AI-related investment is not limited to technology firms but has been adopted by companies across a myriad of sectors and industries, thereby acting as a growth driver for the economy as a whole.
It’s worth noting that a large share of the technology fueling this investment—particularly semiconductors and computing hardware—originates abroad, especially from Taiwan and China. This means that the direct contribution of tech spending to measured GDP growth is somewhat diluted once imports are taken into account. But this nuance doesn’t diminish AI’s broader economic influence. When incorporating the multiplier effects of AI—rising equity-market wealth, productivity gains as firms integrate AI into operations, and job creation tied to expanding AI infrastructure—the overall economic impact is likely far greater than what headline GDP data alone suggests.
Tech investment has strengthened the economy’s resilience. Still uncertainty around the ultimate return on AI spending has shifted market attention toward whether growth can be sustained and whether AI will deliver the outcomes investors expect. Against that backdrop, the consumer remains the economy’s most reliable anchor. Despite higher borrowing costs and elevated inflation, households continue to benefit from low unemployment and the wealth accumulated from rising equity and real estate prices.
Consumer spending—roughly 70% of U.S. GDP—expanded by nearly 3% year-over-year in the first half of the year, outpacing the contribution from tech investment and reaffirming its role as the primary engine of economic growth.
AI should therefore be viewed not as a replacement for the consumer, but as a complementary growth driver, one that can bolster the expansion, but cannot sustain it alone.
As tech giants continue to invest heavily in AI infrastructure, the theme is expected to play a larger role in shaping the macroeconomic landscape, and raises two key implications:
- Favorable macro environment: If AI yields productivity and economic gains, the U.S. could experience a more favorable macroeconomic climate, expanding the stock market rally beyond a select group of dominant stocks to broader beneficiaries of AI adoption.
- Vulnerability to corrections: Conversely, AI’s growing influence also raises concerns about potential corrections. If major tech firms reduce AI investments or fail to meet earnings expectations, or firms in other sectors and industries fail to monetize anticipated AI-related productivity growth, that could amplify downside risks in the markets. What has driven economic growth this year could just as easily contribute to future market downturns.
2025 has been shaped by intense enthusiasm for AI and innovation. The coming year, however, will demand a different lens—one focused on balance-sheet strength, earnings quality, and the durability of growth. With valuations elevated and AI-related debt climbing, the risks of overheating are real. But resilient fundamentals provide a counterweight. Ultimately, the next chapter of the AI era will hinge less on excitement and more on execution: which companies can transform investment into lasting value, and which cannot.
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