AI spending is keeping the US economy out of recession, with datacenter infrastructure and model development providing the only significant growth amid trade turmoil, tariff shocks, and high borrowing costs.
This is offsetting the drag from higher interest rates and the impact of the Trump administration’s chaotic trade policies, numerous sources say.
Big money is nervous about AI hype, but not ready to call it a bubble
“AI has kept the economy out of a recession,” BNP Paribas chief US economist James Egelhof told Yahoo Finance this week, noting the spending boom has convinced businesses that robust growth and a productivity surge are imminent.
Apollo Global Management chief economist Torsten Sløk wrote yesterday: “There is basically no growth in corporate capex outside of AI at the moment.”
Unlike typical investment patterns, AI spending hasn’t fallen despite Federal Reserve rate hikes because, Sløk noted, datacenter investment is ultimately financed by rising equity valuations of the “Magnificent Seven” including Microsoft, Amazon, Alphabet, and Nvidia.
Analyst firm Omdia estimates that global datacenter capex will top $657 billion in 2025, almost double the figure of just two years ago, with the US dominating. Amazon’s annual datacenter spending alone exceeds $100 billion, roughly Costa Rica’s entire GDP.
Jason Furman, Economist and former Deputy Director of the US National Economic Council, estimated in a New York Times podcast that 92 percent of the economic demand in the first two quarters of this year came from information processing equipment and software.
“Ultimately, what we’re really hoping for is that AI shows up on the supply side of the economy, actually helping us do more with less,” he said. Some of that is happening, he claimed, “but there hasn’t been anything particularly special about productivity growth to date.”
This is echoed in numerous studies showing that despite the billions being poured into AI, the return on investment remains uncertain.
A UK government trial of Microsoft’s M365 Copilot found no discernible gain in productivity, speeding up some tasks yet making others slower. US research revealed that companies invested $35-40 billion in generative AI initiatives, yet 95 percent have seen zero returns.
The air is hissing out of the overinflated AI balloon
Questions about unsustainability are intensifying. Management consultants at Bain & Company estimate that current spending trajectories would require the tech sector to generate $2 trillion in annual AI sales by 2030 – fueling concerns about another tech bubble.
The Bank of England’s Financial Policy Committee warned this month about the growing danger of a sudden correction in the financial markets due to inflated tech and AI stock valuations. Financial analysts have expressed particular concern over OpenAI’s $500 billion valuation despite the AI darling not turning a profit yet.
OpenAI chief Sam Altman himself acknowledged the AI industry is in a bubble, but seemed relaxed about potential consequences, even though a recent report claimed the company is losing about three times more money than it’s earning – with just 5 percent of ChatGPT’s 800 million users actually paying for it. ®