The False Prosperity of U.S. GDP: Propped Up Entirely by AI
Data from the U.S. Bureau of Economic Analysis (BEA) shows that the U.S. gross domestic product (GDP) grew by 4.3% year - over - year in the third quarter, significantly exceeding the expected 3.2%.Nevertheless, many Wall Street analysts have raised doubts, arguing that this GDP growth rate is largely driven by contributions from the artificial intelligence (AI) sector, while non - AI industries are experiencing a slump with weak investment willingness, as if going through a cold winter.
Data from the BEA reveals that the U.S. GDP rose by 4.3% year - on - year in the third quarter of this year, which far outpaced the general expectation of 3.2% among analysts.
Fueled by this strong economic data, Wall Street traders were beaming with optimism. U.S. stocks surged for several consecutive days afterward, on track to end the year near all - time highs.
However, some analysts on Wall Street have cast doubt on this GDP figure.
They have warned that this GDP growth rate is likely to be heavily supported by the AI sector. In contrast, non - AI sectors are actually in a state of contraction, and the willingness to invest in these non - AI industries remains weak.
A recent report released by Pantheon Macroeconomics stated that in the third quarter of this year, private fixed investment (an indicator used to measure corporate spending) "increased solely due to AI - related expenditures". A chart published by Oliver Allen, an analyst at Pantheon, showed that in all non - AI industries, private fixed investment was actually on the decline:
"The willingness for capital expenditure remains depressed, indicating that investment in sectors other than those related to AI is still weak."
Capital expenditure in AI (in green) has maintained continuous growth, while that in non - AI sectors (in blue) has been in a steady state of contraction.
Deutsche Bank also expressed a similar view in a recent report discussing whether AI constitutes a bubble. Adrian Cox and Stefan Abrudan, analysts at Deutsche Bank, wrote:
"Investment in AI - related industries is crucial for GDP growth. Without technology - related spending, the U.S. would have been on the verge of recession this year, as spending in other industries has stagnated since the COVID - 19 pandemic."
Weak Investment Willingness in Non - AI Sectors
Pantheon Macroeconomics noted in its recent report that private fixed investment, a key measure of business spending, rose only due to AI - related outlays in the third quarter of this year. Oliver Allen, an analyst at Pantheon, accompanied his findings with a chart demonstrating that private fixed investment across all non - AI sectors was actually in decline:
"Capital expenditure sentiment remains subdued, pointing to weak investment outside AI - linked industries."
Capital expenditure in AI (green) keeps growing, whereas that in non - AI sectors (blue) keeps shrinking.
Deutsche Bank echoed this sentiment in a recent report exploring whether AI is a bubble. Adrian Cox and Stefan Abrudan, analysts at the bank, wrote:
"Investment in AI - related sectors is critical to GDP growth. Without tech - related spending, the U.S. would have been close to recession this year, as spending in other sectors has stalled post - pandemic."
Massive AI Investment Largely Debt - Fueled
Capital expenditure in AI has been substantial this year. Justin Post and Nitin Bansal, analysts at Bank of America, estimated that the five major U.S. tech giants (Alphabet, Meta, Microsoft, Amazon, and Oracle) will spend a total of $399 billion on AI capital expenditure this year, with the figure set to surpass $600 billion in the coming years.
Capital expenditure in AI by the "Big Five" is expected to grow further in the next few years.
However, a significant portion of this AI capital expenditure is financed by debt.
Spencer Rogers from Goldman Sachs stated: "In the U.S. dollar credit market, the net supply of new corporate debt tied to AI has exceeded $200 billion in 2025, more than doubling the total from last year... 30% of the net supply of U.S. dollar credit this year is AI - related." He predicted that this figure will rise even further next year.
According to Deutsche Bank, the cumulative investment by these tech giants in AI data centers will reach $4 trillion by 2030 — more than the U.S. Apollo moon landing program in the 1960s: "This is equivalent to 10 times the inflation - adjusted cost of the Apollo program, with no guarantee of returns."
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