AI Investment Drives US Economy Growth Amid Recession Risks

The U.S. economy has avoided a recession largely due to significant investments in artificial intelligence (AI), which have fueled growth in data centers, semiconductor production, and tech infrastructure. Leading tech firms like Microsoft, Meta, Alphabet, and Nvidia are driving a surge in capital spending, contributing notably to GDP growth and reshaping productivity despite high interest rates and geopolitical uncertainties. This AI-driven investment has offset weaker consumer spending and altered traditional monetary policy effects, as companies finance investments via equity rather than debt, allowing the Federal Reserve some leeway to ease policy despite inflation risks. However, concerns remain about jobless growth, with Goldman Sachs and other analysts warning that AI's efficiency gains may lead to slower employment growth and potentially exacerbate labor market challenges. Additionally, financial sector stresses and ongoing U.S.-China trade tensions persist, adding uncertainty to the economic outlook. Overall, while AI investments sustain economic momentum, experts caution about the sustainability of this growth and the potential social impacts of automation.