How is AI reshaping the economy?

Big Tech is now 'propping up the US economy'

Illustration of a robotic arm counting on an abacus
Big Tech is a hedge against 'decelerating' conditions
(Image credit: Illustration by Stephen Kelly / Shutterstock / Getty Images)

Artificial intelligence is reshaping the American economy, but something more is happening: Increasingly, it is the economy. That might not be a good thing.

"Big Tech is becoming an even more important part of American prosperity," said The Washington Post. Google, Meta, Amazon and Microsoft are collectively "on track to spend more than $350 billion" building AI centers. That spending is large enough to be a "countervailing force" to a U.S. economy that appears to be "decelerating" under the weight of President Donald Trump's tariff and immigration policies. But that growth has also raised concerns among economists who believe that a healthy economy has a diverse range of activities. The AI sector "seems to be carrying the economy on its back now," said Callie Cox of Ritholtz Wealth Management.

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What did the commentators say?

The AI sector is "so big it's propping up the U.S. economy," said Brian Merchant at Blood in the Machine. Apple became the first $1 trillion company in 2018. Now "there are nine $1 trillion+ tech companies" with much of that growth happening over the last two years "on the back of the AI boom." And over the last six months, tech spending on AI infrastructure "added more to the growth of the U.S. economy than all consumer spending combined." The question now: If AI is undergirding the economy, "what happens if the AI stool does get kicked out from under it all?"

All that tech sector spending on data centers is "draining American corporations of cash," said Greg Ip at The Wall Street Journal. But while AI has "obvious economic potential," the payoff "remains a question mark." Investors were "throwing cash at startup web companies" during the "nascent internet boom" of the late 1990s. A lot of those companies went bust, leading to a recession in 2001. That kind of downturn "looks far-fetched now," but if tech companies prove over-optimistic, "their current pace of capital spending will be hard to sustain."

What next?

Wall Street is happy with tech companies for now, but the "urgency to show a payback from generative AI spending will only intensify," said Richard Waters at the Financial Times. While many businesses plan to employ AI, "few have put it into full-scale use." Big Tech "may not have all the answers" about how the technology will be used. Instead, they are investing massively in the belief "they are best placed to figure it out." Bigger is not always better, however. The release of the Chinese-made DeepSeek AI chatbot earlier this year is a warning that "smaller, cheaper AI models" could be "serious competition" to America's tech giants.

Joel Mathis, The Week US

Joel Mathis is a writer with 30 years of newspaper and online journalism experience. His work also regularly appears in National Geographic and The Kansas City Star. His awards include best online commentary at the Online News Association and (twice) at the City and Regional Magazine Association.