U.S. AI-related capital spending should total close to $600 billion this year, about 2% of GDP, more than 10% of all business fixed investment. Numbers that large invite an obvious worry: every dollar routed into accelerators, substations, and server halls is one not routed somewhere else. Additionally, much of this AI spending is going towards imported hardware. If U.S. companies are spending so much on AI, does that mean the U.S. economy is now driven by AI spending?
Hyperscalers funded the early AI build-out largely by reducing share buybacks rather than cutting operating budgets. As capex has moved above operating cash flow, they have increasingly turned to the bond market instead of scaling back spending. For companies buying AI tools downstream, AI related costs remain modest: most expect them to equal just 1–5% of their IT budgets. Roughly one-third of that spending is new, while the remaining two-thirds comes from reallocations, mainly from cloud, analytics, and other intermediate services.
Data centers have climbed to 9% of private nonresidential construction since 2024, but that surge arrived precisely as increased spending on infrastructure subsidized from the IRA and CHIPS acts started to slow down, freeing crews and materials on a comparable scale. In some states, data centers now account for half or more of non-residential construction. However, nationally the data center construction spree has not caused widespread shortages of construction materials or significant amounts of wage growth for construction workers. This may change in a few years, if projection about spending on data centers proves to be true.
The broader economy is much less exposed to the AI capital cycle than equity markets, so even a sharp pullback in AI spending is unlikely to destabilize the US economy. AI investment is expected to add about 0.1% to U.S. GDP growth this year, which is meaningful, but not essential to the overall growth rate of around 2%. From an investment perspective, this supports maintaining diversified [1] equity exposure. While the U.S. stock market is heavily concentrated in the AI trade, the economy is not. Beyond the AI names, many blue-chip companies still offer compelling investment opportunities.
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[1] Diversification does not guarantee a profit or protect against a loss in a declining market. It is a method used to help manage investment risk.
