U.S. Economy: A Fragile Boom Supported Solely by AI

A recent analysis report has poured cold water on the seemingly robust US economy. The report points out that the current economic expansion is rapidly narrowing its foundation, with marginal improvements in investment, consumption, and even employment almost entirely driven by the theme of artificial intelligence. This indicates that it is a growth with extremely low tolerance for errors, with models showing approximately a 50% chance of recession in the next 12 months.

Beneath the growth data, the engine is highly concentrated. Over the past four quarters, AI-related equipment investment has increased by about 17%, while non-AI equipment investment has decreased by approximately 1%. In non-residential construction investment, data center construction contributed about 0.7 percentage points to growth, while all other sectors combined dragged down about 7 percentage points. Stripping out AI’s contribution, the US economy is closer to stagnation at a low growth rate.

The so-called “resilience” on the consumption side is also not due to widespread income improvement. Despite real disposable income growing by only 1.5%, personal consumption expenditures increased by 2.6%. This divergence is mainly due to a highly concentrated stock wealth effect. The stock market performance driven by AI and technology sectors has amplified high-income households’ consumption, while middle- and low-income groups are still under inflationary pressure. The reliance of consumption on asset prices has become unusually fragile.

The inflation outlook is equally not optimistic. The effective tariff rate in the US has jumped from 2.5% at the beginning of the year to over 13%, equivalent to a hidden tax increase of about 1.1% of GDP. This cost-push inflation is not a one-time shock; it is expected to continue pushing up core inflation levels over the next few years, keeping it persistently above the Federal Reserve’s 2% target.

Beneath the surface of the labor market, weakness is accumulating. Excluding healthcare and social assistance industries, non-farm employment has decreased by an average of 41,000 jobs per month over the past four months. Several survey indicators, such as business hiring expectations and commercial loan data, have also weakened, indicating a chronic contraction driven by demand-side factors.

Policy-wise, the situation is also a dilemma. On the fiscal side, the “Big Beautiful Bill” will bring about $55 billion in tax refunds, providing a brief boost to consumption in Q2 2026, but the stimulative effect will quickly fade afterward. On monetary policy, the Federal Reserve plans to cut interest rates but is constrained by inflation driven by tariffs, leaving very limited room for easing.

The final judgment of the report is sharp and clear: the US is not yet in recession, but this is an expansion solely dependent on a single theme. The real test over the next 18 months is whether AI can truly translate the hot narrative in capital markets into broad and genuine productivity gains. Under this combination of “highly concentrated growth” and “cost-push inflation,” the asset allocation logic for assets like gold is also changing. It is shifting from a cyclical safe haven to a structural asset in an era of high uncertainty.

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