The artificial intelligence boom is creating a two-speed U.S. economy, fueling record capital spending and distorting everything from corporate profits and stock market returns to international trade flows.
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AI boom adds 2 points to 2026 GDP growth
A May 2026 economic analysis reveals the artificial intelligence boom is creating a two-speed U.S. economy, fueling record capital spending while masking weakness in other sectors and creating significant distortions in key economic indicators. The AI economy is estimated to have grown 31 percent in the first quarter, compared to just 0.1 percent for the non-AI economy, with President Trump's AI czar, David Sacks, predicting AI will add two percentage points to economic growth this year.
"Gross computer spending contributed 1.7 percentage points of the first quarter’s 2 percent growth. Net out imports, and that drops to just 0.4 point," Ernie Tedeschi, chief economist at Stripe, calculated, highlighting the significant role of imported equipment in the boom.
The distortions are stark across the board. First-quarter S&P 500 earnings are on track for a 27 percent increase, but this is heavily skewed by a 61 percent profit surge for the "Magnificent Seven" tech giants. For the other 493 companies in the index, profits grew a more modest 16 percent. This concentration of gains has pushed labor's share of total business-sector output down to 54.1 percent, the lowest since records began in 1947.
This intense concentration of growth and profits into a handful of AI-related companies raises concerns about market fragility and exacerbates economic inequality. While the technology is here to stay, the current frenzy, if it were to bust, could have unpredictable consequences for an economy whose traditional indicators are being warped, making effective policy decisions increasingly difficult.
A Tale of Two Economies
The U.S. economy is increasingly divided between the supercharged AI sector and everything else. Morgan Stanley forecasts that capital spending by the five largest AI "hyperscalers" will reach $1.1 trillion next year, a figure that would represent 3.3 percent of GDP and exceed projected spending on national defense. This investment surge was visible in the first quarter's GDP figures, which showed investment soaring 43 percent in tech equipment and 22 percent in data-center construction, while investment fell in housing and business structures.
This reality distortion field has engulfed financial markets. The S&P 500's 7 percent rise since the start of the Iran war is almost entirely attributable to the Magnificent Seven. An equal-weighted index of all 500 companies actually fell slightly over the same period. The effect extends beyond the top tech firms, with companies like Intel seeing stock surges due to demand for their components in data centers, even as they face strategic challenges elsewhere.
Labor's Share and Global Trade
The AI boom's benefits are not being distributed evenly. As corporate profits in the tech sector skyrocket, labor compensation grew just 3.1 percent annualized in the first quarter, shrinking 0.5 percent after inflation. The record-low 54.1 percent labor share of output reflects a growing disconnect between headline economic growth and the financial reality for ordinary workers. This trend is further evidenced by companies like Peloton, which is using AI-dubbed programs for global expansion, and Papa John's, which is elevating its digital ordering with AI agents, both using technology to drive efficiency.
The boom is also redrawing global trade maps. The massive demand for advanced semiconductors and other AI-related hardware has caused U.S. imports to rise, widening the trade deficit. Simultaneously, it has created an almost unthinkable 24 percent trade surplus for Taiwan's GDP and fueled a 78 percent rise in South Korea's Kospi stock index, home to semiconductor giants like Samsung Electronics and SK Hynix.
This article is for informational purposes only and does not constitute investment advice.
[1] AI Is Distorting Practically Everything About the Economy - WSJ[2] AI boom fuels record spending but fiscal impact uncertain[3] Papa Johns Announces First Quarter 2026 Financial Results[4] Peloton Announces Q3 FY2026 Financial Results[5] LightPath Technologies Reports Fiscal 2026 Third Quarter Financial Results
