Without AI, the US economy would not grow this year

BarcelonaThe US economy would have barely grown in the first half of 2025 were it not for investment in data centers by major artificial intelligence (AI) companies, according to a study by Jason Furman, professor of economics at Harvard University. This data, corroborated by other economists, lends further weight to arguments that the AI industry is affected by a bubble that is causing companies to oversize. Specifically, Furman's calculations estimate that, although investment in software and equipment represents only 4% of total US gross domestic product (GDP, the indicator that measures the size of an economy), it contributed 92% of all growth recorded in the country between January and June. In other words, without the large investments in AI, the annualized growth rate of US GDP would have been only 0.1%, practically zero.

The Harvard professor, who also served as chairman of the White House Council of Economic Advisers during Barack Obama's presidency, clarified in a message on social media that, had this massive investment in the AI sector not occurred, growth would likely have been positive. However, the issue, according to Furman, is that the fact that large multinational AI companies are investing so heavily in these centers has two negative effects on the growth of other sectors.

First, the high electricity consumption required increases the cost of electricity for households and businesses in other sectors. Second, interest rates would likely be lower without these investments, as the demand for credit would be lower and the Federal Reserve (the Fed, the country's central bank) would be forced to lower interest rates. In any case, both the higher electricity costs and the higher interest rates have a negative effect on consumption and investment by households and businesses, which depresses economic growth.

Furman's data is a new sign pointing to a bubble in the AI industry. The fact that the growth of the US economy depends exclusively on investments in data centers may seem outlandish, but it becomes clearer when considering the size of the sector's major companies and their stock market valuations. In the S&P 500, the stock market index that groups the 500 largest publicly traded companies in the US, the value of the 10 multinationals that invest the most in AI—Nvidia, Apple, Microsoft, Alphabet (Google), Amazon, Broadcom, and Meta (Facebook, Instagram, and WhatsApp)—makes up 60% of the index's total value. In other words, the remaining 490 companies represent the other 60%. This is a fact that many analysts point to as a sign of a market bubble.

Similarly, other indicators also point to an overvaluation of these companies, which will eventually need to be corrected. For example, the Fisher P/E ratio is a frequently used indicator to determine if there are bubbles in the US stock market. The index takes the value of the S&P 500 and divides it by the average earnings of the 500 companies that comprise it. Thus, the higher the resulting figure, the more overvalued the stock market is, and therefore, the greater the likelihood of a more or less sudden drop to correct its value.

Currently, the index stands at 39.97, the highest figure since the bursting of the dot-com bubble in 2001—the previous peak was 43.83 in 1999—and above the levels recorded during the stock market crash of 1999 (32.56).

Fears of a bubble persist

In recent weeks, investor activity has reflected growing fears of a stock market bubble fueled by the overvaluation of AI. The most striking example has been investment giant Berkshire Hathaway, founded by billionaire Warren Buffett, which has sold its positions in two funds linked to the S&P 500. Conversely, it has increased its investment in the pizza chain Domino's (fast food consumption tends to rise in the US during economic downturns). Last week, the Financial Times reported that Deutsche Bank was exploring options to hedge potential losses stemming from its exposure to AI companies and the well-known investor Michael Burry Burry posted some short positions (i.e., bets that the company will lose value) on X against Nvidia and Palantir, two of the giants of artificial intelligence. However, this week Burry clarified his position: contrary to what the US press published, the investor explained that he doesn't have more than $900 million invested against Palantir, but only $9 million, a very significant difference that casts doubt on whether he is entirely convinced of the existence of a bubble in the AI sector.

However, Burry dispelled the doubts by changing his X profile picture, which went from a still from the movie Star Wars in a painting by the 17th-century Dutch painter Jan Brueghel entitled Allegory of Tulip Mania, which deals with the first financial bubble in modern history, which took place with speculation on tulip bulbs in the Netherlands.