The AI spending boom is eating the US economy

Neil Dutta at Renaissance Macro flagged this eye-popping stat after the advance release of second-quarter US GDP data:

“So far this year, AI capex, which we define as information processing equipment plus software has added more to GDP growth than consumers’ spending,” he tweeted.

The US consumer makes up about 70% of the economy. Over the long term, that’s been the undisputed engine of growth. But these two segments that make up 6% of GDP have been playing a bigger role in fueling the expansion so far this year, on average.

I am among the bigger “the stock market IS the economy” people you will ever meet (because I enjoy holding views grounded in data).

But I was beginning to question that a little in light of some of the bifurcation in the stock market, with some more consumer-oriented stocks (Chipotle and UPS, for instance) plummeting after earnings versus the continued strength in AI-linked names. All the while, the S&P 500 continued to grind higher to fresh record highs.

It was getting more tenuous to hold the position that the stock market is a good reflection of the economy unless AI was supplanting the consumer as “the economy.”

Well, since this capex binge shows that in the first half, AI has indeed been eating the US economy… priors confirmed, now back to work everyone.