The US economy seems to be doing gangbusters lately, largely thanks to incredible booms in the tech sector.
The stock market is booming — the S&P 500 hit 15 record closing highs so far this year, while the Nasdaq Composite boasts 17. The country's GDP is growing better than expected. Microsoft just became the second $4 trillion company in history, just weeks after Nvidia became the first.
But those headline numbers don't seem to be trickling down to normal, working people. In fact, something interesting happens if you take AI away from the economy: you find a country that has been in the throes of stagnation, teetering on the brink of something even worse. By stripping away the effects of gluttonous AI hype, we see that the record-breaking numbers mask a dark storm swirling just below the surface.
For one thing, though Wall Street appears to be doing great on paper, there are really just a tiny handful of tech giants running the show. A recent analysis by the Financial Times noted that, though stocks in most sectors did very well, actual profits are falling — a glaring red flag that the magnificent seven, the tech stocks representing Nvidia, Amazon, Google, Tesla, Microsoft, Apple and Meta, are dragging the rest of the S&P around by the collar.
Take these AI giants away, and the actual performance of non-tech companies has been pretty foul. A CNBC analysis argued that 26 percent of the S&P 500’s explosive growth over the last three months came from lavish spending on the magnificent seven.
Elsewhere, the numbers aren’t so hot. The FT highlights that profits in sectors like energy, consumer goods, financial markets, and raw materials are way down, for example — yet their stocks continue to climb. Without tech’s outrageous money moves, the stock market would be essentially stagnant. As TradeSmith editor Michael Salvadore writes, AI has essentially “bailed out the stock market… its investors… and the [Federal Reserve].”
It’s important to note that the stock market is not the economy. You’d be forgiven for thinking they were, though, because the two happen to be rotting away at the exact same time. When looking at small- and medium-sized businesses not reflected in the stock market, for example, the FT writes that “corporate profits hardly grew in the second quarter from the year before.”
We also see this in GDP growth — the total monetary value generated by a country — which grew 3% between Q1 and Q2. That’s a healthy number, slightly higher than predicted, which is happy news after the negative turn reported earlier this year. Of that 3 percent, however, the economist Paul Kedrosky estimates that a blistering 40 percent came from massive spending on AI which, it bears mentioning, has yet to actually make anyone any money.
Even worse, Kedrosky writes, the amount that AI appears to be contributing to GDP growth is increasing — dragging the economy higher and higher with it. If it weren’t for the glut of AI spending in the first few months of the year (like the record-shattering $40 billion OpenAI deal), the economist estimates that the Q1 GDP hit would have been over four times worse. Now, with the data from Q2, AI — the stuff that’s polluting the internet with computer-generated slop — appears to have significantly helped reverse that trend.
With these kinds of effects, Kedrosky argues that AI spending is basically a “massive private sector stimulus program.” And by prioritizing private tech companies, this bailout “is not, by definition, being spent on something else.”
This is where workers come into the picture, normal people who don’t have the power to reorder the stock market with a few half-baked tweets.
Whether they know it or not, US workers are standing in the eye of the storm, surrounded by a turbulent economy at all sides. For one thing, an abysmal July jobs report showed the country that, as far as mom and pop are concerned, the economy is spinning out fast.
That’s making it harder to find jobs, adding to deceptively high unemployment, as well as lower and lower household income, even as corporate profits continue to rise. Though AI looks like the easy scapegoat here, it’s important to note that these trends began years before ChatGPT was even a blip in the radar.
As if that weren’t enough, the little money we do take home is caught in an all-out tug-of-war bout between Donald Trump and the Federal Reserve, the agency that oversees lending rates, affecting the economy greatly. The Fed is currently locked in a “damned if you do, damned if you don’t” scenario as far as inflation is concerned, at a moment when Trump’s historically high tariffs are expected to send prices of goods and services to the moon.
The last half of the year is looking to be pretty rough, as all of these factors snowball into lower consumer spending overall. When the cash stops flowing in a capitalist economy, well, bad things tend to happen.
Without AI to fudge the numbers, it’s easy to see that our economy is in a deep malaise — a tendency of monopolistic economies, as democratic president Jimmy Carter found the hard way almost 50 years ago when he presided over similar financial conditions.
Carter’s crisis came at a time when factory monopolies had concentrated enough power as to require some sort of dramatic action. The president’s response led to sky-high unemployment, increased economic inequality, and a handing over of the keys to the kingdom — from industrial monopolies to financial capital.
In our current moment, the AI boom has become both a lifeline and a smokescreen, breathing temporary life into the market while hiding the rot below. The gains of 2025 are largely inaccessible to everyday Americans struggling with fewer job opportunities, stagnant wages, and rising costs. If this pattern holds, we may soon face the same hard truth that haunted Jimmy Carter’s America: that an economy too concentrated in the hands of a few can only fake it for so long.
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