A gulf is opening up in the heart of American business as two industries championed as central to the country’s future — manufacturing and artificial intelligence — appear to be heading in different directions. Both AI and manufacturing have been in the spotlight in Washington through successive administrations. President Donald Trump this year said he’d do “whatever it takes to lead the world in artificial intelligence,” while he has championed stemming a decades-long slide in American manufacturing as a top goal. But while AI is flourishing this year, manufacturing is entering an ever deeper slump. “You have the software and services world accelerating, and becoming almost a monomania for the culture, at the same time that manufacturing remains flat or worse,” said Mark Muro, a senior fellow at the Brookings Institution. “The AI boom is kind of papering over some other parts of the economy that aren’t going well.” Advertisement Advertisement Advertisement Advertisement Advertisement The Trump administration has embraced using a broad array of tariffs to protect U.S. manufacturers from foreign competition, marking the latest White House-led push after the Biden administration spent tens of billions of dollars boosting U.S.-made semiconductors and other projects. But so far, the sector is down 38,000 jobs since the start of the year, according to the Bureau of Labor Statistics. The manufacturing slump comes as artificial intelligence has experienced an unprecedented investment boom, sending tech-company valuations into trillions of dollars. Visions of how AI could transform the business world have fueled a surge in microchips and cooling systems, along with the data centers to house and the energy to power all of it. Some experts worry that the AI industry will employ too few workers once the hype dies down, because the data centers that power AI require relatively few workers to operate. There are also fears that a bursting AI bubble could hit an already-fragile economy. Advertisement “One interesting implication of all this will be that this AI [spending] boom is likely to create less jobs, particularly blue-collar ones, than previous waves of infrastructure buildouts,” said Stephanie Aliaga, global market strategist at JPMorgan. American manufacturers employed some 19.5 million workers at the industry’s 1979 peak. That number has since shrunk to fewer than 13 million, including losing an estimated 78,000 more positions in the one-year period ending in August. It’s not just jobs. Fewer manufacturers are starting up, Census data shows. Factory investment fell by about 6 percent in the one-year period leading up to July, according to Bureau of Economic Analysis data, marking the first decrease since early 2021. Advertisement Advertisement Advertisement More finished goods are being produced, according to a measure of manufacturing output from S&P Global. But Chris Williamson, chief business economist at S&P Global Market Intelligence, said the higher production really shows “tariff front-running,” as manufacturers work through the raw materials they bought before tariffs kicked in. Experts said the industries that have benefited from tariff protections have been far offset by the sectors hit by higher costs and uncertainty. “The jobs gained by protecting sectors like steel and aluminum, for example, were far outweighed by losses due to those inputs becoming more expensive,” said Meagan Martin-Schoenberger, senior economist at KPMG. Advertisement Executives from U.S. manufacturers including General Motors, Caterpillar, John Deere, and others collectively flagged billions of dollars in tariff-related costs in recent discussions with investors. U.S. automakers saw lower profit margins in the second quarter of 2025 than at any time since the coronavirus pandemic, according to government data analyzed by Michigan State business professor Jason Miller ― a trend that the companies have blamed in part on tariffs. Advertisement Advertisement Advertisement Advertisement Annual manufacturing investment, which includes advanced chipmaking facilities, more than doubled in the two years after the 2022 Chips Act before peaking in 2024, according to the Bureau of Economic Analysis. Many of those projects are still under construction. Overall factory investment has decreased since then in large part because the Biden-era chips investments started winding down, experts said. The Semiconductor Industry Association, a trade group, said semiconductor operations directly accounted for around 345,000 jobs, and another 2 million “indirect or induced” U.S. jobs. White House spokesman Kush Desai said the Trump administration is taking a pro-growth mix of policies to support U.S. manufacturing, citing tariffs and tax incentives for equipment. Numerous foreign firms — European pharmaceutical giants, Taiwan’s chipmakers and Japan’s automakers, to name a few — have promised to build U.S. factories. But those investments could take years to materialize. Advertisement “America’s manufacturing dominance was neither built nor lost overnight — it took decades of concerted investment and supportive policymaking to build up, and decades of lackadaisical and incompetent policymaking to unwind,” Desai said in an email. The slump in brick-and-mortar manufacturing is in sharp contrast with an astonishing rise in investments meant to support artificial intelligence. Tariffs have not deterred imports of the core hardware powering the AI economy — much of which has been exempted from new duties. Shipments of servers, high-end chips and power systems have jumped 64 percent year-to-date, a surge that reflects the intensity of the data center boom, according to Washington Post analysis of U.S. Census Bureau import data. Advertisement Advertisement Investment in data centers jumped nearly 37 percent in the first half of 2025 compared with a year earlier, while factory construction slipped about 3 percent over the same period, according to data collected by the Bureau of Economic Analysis. Domestic investment in computer equipment — the backbone for data processing, cloud services and AI — is up more than 45 percent year over year, while spending on traditional industrial equipment has barely moved. Advertisement Investors have poured tens of billions into AI start-ups and semiconductor firms, a signal of where they see the future growth. If the stock market’s AI-related euphoria were to unwind any time soon, it could have cascading effects of the rest of the economy, according to Pantheon Macroeconomics senior U.S. economist Oliver Allen. “If the AI investment boom were to collapse like a house of cards, I think you would have a significant drag on growth,” Allen said. There are also concerns that artificial intelligence investments won’t yield the same employment opportunities as traditional manufacturing. Although data centers could contribute to job creation in other industries over time by supporting the development of AI technologies and the construction of the data centers requires many workers, the buildings themselves employ relatively few people, said Stephen Ezell, a vice president at the Information Technology and Innovation Foundation. “While it may take 1,000 or more workers to construct a data center, often only 100 to 300 employees will work in the building when it’s operational,” Ezell said. “Meanwhile, a traditional auto factory could employ several thousand employees over the same square footage.” Advertisement The U.S. government has invested deeply in expanding microchip production facilities, with the Biden administration allocating tens of billions of dollars through the CHIPS and Science Act of 2022 for manufacturing projects. Many of those factories are not yet operational, said Williamson, the S&P economist. Advertisement Advertisement Advertisement Advertisement Nvidia, the U.S. company most intimately connected to the AI boom, recently brokered a partnership with longtime chip manufacturer Intel, taking a $5 billion stake. Intel has been laying off thousands of employees to cut costs, and recently gave the U.S. government an equity position. Manufacturing jobs tend to pay better than an equivalent job in another industry for almost every group of workers, said Todd Tucker, director of industrial policy and trade with the Roosevelt Institute. Advertisement “You really to some extent have won a lottery ticket as a blue collar worker if you have a manufacturing job,” Tucker said. Chipmaking operations can similarly be a boon for the communities around them, Tucker added, bringing high-paying engineering jobs and training pipelines. But they are generally not as labor intensive as the assembly lines of the 20th century were, he said. Top artificial intelligence innovators say they are working toward developing artificial general intelligence — algorithms that could theoretically possess humanlike cognitive abilities. There are questions about whether today’s AI tools are generating enough revenue to match the hype, however. Michael Strain, an economist with the conservative American Enterprise Institute, said he believes artificial intelligence will “make us all rich one day,” but is probably a net loss for productivity in the short term.