How AI Spending is Lifting U.S. Economic Growth, and What That Means for Investors
There is little question about the impact the artificial intelligence boom is having on S&P 500 earnings and total return.1 According to my colleagues at Zacks Investment Research, the “Magnificent 7” group of mega-cap technology stocks is on track to bring in 26% of all S&P 500 earnings this year, up from 23.2% of the total in 2024 and 11.7% in 2019. The group also made up roughly 35% of the index as of the end of the third quarter.2
But what about the impact the AI spending boom is having on the U.S. economy?
In short, it’s been significant.
By some estimates, first-half 2025 GDP growth was substantially powered by spending on data centers, information-processing equipment, and software. Excluding these categories, economic growth would have been more modest. To grasp the scale of AI’s impact, consider that the dollar value of AI data-center investment has exceeded total consumer-spending contributions to GDP in 2025. The chart below also demonstrates data centers’ contribution to total fixed private investment. It’s pretty remarkable.
Wall Street Journal3
Without the lift from AI capex, economic growth may have been more modest, closer to 1.5% perhaps, in the first half. Growth is growth, but I think it’s a fair argument to frame the broader economy’s performance as more ‘steady’ than ‘booming.’ The impact of AI spending doesn’t dilute growth elsewhere, it just moves the needle in the booming direction.
Outside of the AI theme, investors can find soft patches in the economy. Retail sales in September (delayed due to the shutdown) rose just 0.2%, with noticeable pullbacks in tariff-sensitive categories such as vehicles, electronics, and clothing.4 Spending on services remained firm, however, which suggests consumers are still spending selectively and with more emphasis on value. It’s a pattern consistent with an expansion that continues, but with less broad-based momentum.
Sentiment surveys show similar nuance. The Conference Board’s confidence index fell in November to 88.7 from 95.5, while the share of households reporting plentiful job opportunities also stepped down. The University of Michigan’s survey has hovered near historical lows for months. As I wrote in a recent column, I think this is symptomatic of a “K-shaped” economy, which is relying more on high-income consumers and wealth effects than on job creation or broad wage gains. This is not a negative setup, it’s just a read on where the economy largely is today.
Does this all mean that a slowdown in AI spending would cause an economic downturn by itself? At this moment, I don’t think so. But I think it could meaningfully trim the growth rate, such that the U.S. economy would be posting more modest growth than the 2% to 3% headline rate that signals overall strength. This possibility does not suggest crouching in defensive mode and waiting for AI spending to pullback substantially—it argues for positioning in solid companies with earnings growth momentum outside of the AI trade.
Bottom Line for Investors
I think it’s clear that AI spending has provided a boost to headline GDP this year. When you strip out the sizable capex numbers, what you see is a modestly positive expansion versus a boom. I want to be clear—this is not a bad backdrop for long-term investors. But it does leave the cycle more sensitive to a potential shift from a single, powerful growth engine (AI capex).
I think that’s the real takeaway here. The economy is in fine shape, but it’s more dependent on one theme than usual. If AI investment keeps flowing, the expansion can keep chugging along. If it downshifts, the underlying modest growth pace may become more visible. Rather than trying to forecast when or if that happens, investors are better served maintaining balance across sectors, styles, and regions so portfolios aren’t tethered to any one story. If AI capex deflates, I could see assets rotating into under-valued areas of the market that are still seeing strong earnings growth.
Disclosure
2 Zacks.com. November 22, 2025. https://www.zacks.com/commentary/2794439/mag-7-earnings-outlook-improves-a-closer-look
3 Wall Street Journal. November 21, 2025. https://www.wsj.com/tech/ai/how-the-u-s-economy-became-hooked-on-ai-spending-4b6bc7ff?mod=article_inline
4 Wall Street Journal. November 25, 2025. https://www.wsj.com/economy/consumers/u-s-retail-sales-rose-0-2-in-september-below-expectations-536756d2?mod=hp_lead_pos11
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