The artificial intelligence (AI) boom is powering America's economic expansion, and in recent months that expansion has shown signs of accelerating.
Economists expect data due on October 29 to show that US gross domestic product (GDP) growth in the third quarter hit its fastest pace in a year.
AI does not appear as a separate line item in the GDP report, but its effects cut across multiple categories. AI contributes to GDP through several channels, including the billions of dollars in direct investment that technology companies are pouring into the technology, the data center construction boom that has followed, and the boost to consumer spending from the stock market rally that AI has helped fuel.
So how big is AI's contribution to GDP? The question is a matter of debate. Some economists see a modest impact, while others calculate a significant one.
Goldman Sachs Group's estimate is relatively conservative. Its economists say AI's impact is constrained by a range of factors, including AI-related imports and inflation, as well as the crowding out of investment in other parts of the economy. Goldman estimates that AI contributed 0.1 percentage point to GDP over the past year.
The US economy grew 2.2% from the second quarter of 2025 to the second quarter of 2026.
A working paper published by the Federal Reserve in July examined business investment in software, data centers, power facilities, and computers and peripherals. It concluded that AI-related gains were uneven across quarters but amounted to roughly one-fifth of overall GDP growth on a one-year basis.
The economic team at Nationwide Mutual Insurance estimates that over the past year, direct AI investment plus spillover effects 鈥?such as job growth from data center construction and the wealth created by the AI-driven stock market boom 鈥?contributed 0.6 percentage point to GDP, or about one-quarter of total growth. "That's pretty substantial," said Chief Economist Kathy Bostjancic.
ING Group expects US economic growth of about 2.4% in 2026, with the direct and indirect effects of AI contributing about 0.8 percentage point, or one-third.
Bloomberg Economics argues that official statistics understate AI's contribution to GDP. Its estimate shows that if government statisticians could better capture the technology's impact, US economic growth in 2025 would have been a stronger 3.1%, rather than the 2.3% on record.
How large is US investment in AI?
AI is poised to become the largest investment in US history. Stijn Van Nieuwerburgh, a professor of finance and real estate at Columbia Business School, predicts that total AI-related investment in data centers, power infrastructure, chips, and computer equipment will reach $10.3 trillion from 2025 to 2032, equal to about 3.6% of US GDP each year. That share would exceed the proportion historically devoted to canals, railroads, electrification, highways, or internet infrastructure. The largest of those, railroad construction from 1870 to 1890, accounted for about 2.2% of GDP.
Where does AI's quantifiable impact on GDP mainly show up?
Spending on software, data centers, chips, computers, and power infrastructure shows up most clearly in the equipment and intellectual property categories of the GDP report. However, a considerable share of the spending underpinning the AI boom goes to components manufactured outside the United States, such as chips, computers, and computer equipment. US government statisticians record the billions of dollars spent on AI goods and services, then strip out the portion produced overseas, because GDP measures only domestic production. As a result, AI-related imports drag down the headline measure of economic growth.
How does AI affect consumer spending?
Through the so-called "wealth effect," Americans spend more when their wealth grows, even if much of that wealth is only on paper. Since 2024, the stock market has repeatedly set new records, partly because of investors' bets on AI. The result: US household wealth rose to a record high in the second quarter of this year. Admittedly, not all stock market gains come from AI, and not everyone benefits from rising share prices. The wealthiest 10% of Americans hold about two-thirds of household wealth, while the bottom half holds just over 2% of the total. But wealthier Americans tend to own stocks and are driving consumer spending, a key engine of economic growth. Some estimates suggest that about half of AI's contribution to economic growth comes from the wealth effect.
"We are seeing high-income households continue to spend strongly. They have income, and they hold wealth. Low- and middle-income households are feeling more financial strain from weak wage growth and rising living costs," said James Knightley, chief international economist at ING.
What would happen to the economy if AI investment cooled?
"It is flattering GDP growth, but it is not everything," said Thomas Ryan, senior North America economist at Capital Economics. Other pillars of the economy include the healthcare sector, which has accounted for about three-quarters of new jobs over the past year. Surveys show that US factories have been adding workers in recent months as output rises. Companies across US industries have also reported strong profits.
Even so, an AI slowdown could still have a huge impact on the economy. In that scenario, business investment would slow. If stock values stopped rising or shrank, the wealth effect would reverse. The labor market could also be affected. AI, for example, is propping up the construction industry. Since the fall of 2024, residential builders have cut 97,500 jobs. But data center construction has pushed nonresidential building to a record high, enough to offset the job losses at residential builders.
What is AI's long-term impact on the economy?
That is a huge unknown. AI leader Anthropic PBC said in its listing filing that AI could pose an "existential threat" to humanity, or "accelerate global growth and significantly improve people's quality of life around the world."
So far, AI's effect on productivity has not been obvious. But the technology appears to have begun affecting parts of the labor market, with some research suggesting it is reducing hiring of entry-level job seekers in fields such as software development and customer support. A study by consultancy McKinsey & Company predicts that AI could force about 11 million US workers to find new jobs over the next decade.
"Even in the best-case scenario, the transition to the new AI era will be one of the most turbulent periods in human history," Microsoft co-founder Bill Gates wrote in an article in August. He said there will be some new jobs, but "without the right policies, there will be far fewer new jobs than there are today."
Although disruptive changes may occur in the medium term, many economists and policymakers predict that AI will deliver rich rewards over the long run. Federal Reserve Governor Lisa Cook said in a September speech: "In the longer run, I am optimistic that AI-driven productivity growth can raise living standards for all Americans."
Comments