AI investment is lifting GDP as hardware orders keep climbing
Computer-related orders rose 3.1% in June, adding fresh fuel to U.S. growth as companies pour money into AI infrastructure.
By Sal Moretti · Money Reporter
3 min read
AI investment GDP tailwinds are still blowing hard: government durable-goods data released Monday showed new orders for computers and related products rose 3.1% in June, a fresh sign that the build-out behind artificial intelligence is feeding straight into the U.S. economy.
Orders for computer-related hardware tied to AI have climbed 17% over the past year, according to the government data. MarketWatch reported that such a pace has not been sustained since the dot-com period more than 25 years ago.
Stephen Stanley, chief U.S. economist at Santander Capital Markets, said business spending remains strong and is being driven in large part by the AI build-out.
The rush is centered on the gear needed to run AI systems: computer memory, powerful chips, networks and data centers. Hyperscalers including Amazon, Google and Microsoft, companies that operate vast cloud networks and data-center systems, are spending heavily as they compete for position in AI. Many other businesses are also putting money into their own internal AI capacity.
How is AI investment helping GDP?
Gross domestic product, or GDP, is the main measure of the U.S. economy’s output. Business investment is one of its two big supports, alongside consumer spending, so a surge in corporate equipment purchases can lift the broader growth rate.
Corporate spending on equipment largely connected to AI added 0.8 percentage points to the 2.1% rise in first-quarter GDP. MarketWatch reported that this was four times the average quarterly contribution since 2000.
Economists expect the second-quarter GDP report to show the economy expanding at a 2.1% annual pace for the second quarter in a row. Oren Klachkin, financial-market economist at Nationwide, said the report should show a solid contribution from business equipment spending, while the June durable-goods numbers point to momentum heading into the third quarter.
That strength is challenging an old assumption on Wall Street and at the Federal Reserve. For years, many economists viewed roughly 1.8% as the U.S. economy’s sustainable growth speed. Economists now say the economy’s optimal growth rate could be higher, helped by AI spending and improving productivity.
Could the AI boom turn into a dot-com-style bust?
The comparison is already hanging over the market. During the dot-com era, computer-related investment surged from 1994 to 1999, then dropped sharply between 2001 and 2005 after the bubble burst and many companies failed.
There is no clear answer yet on whether AI spending will follow that pattern. MarketWatch reported that the AI build-out is still in its early stages, meaning it could take years to know whether today’s investment levels prove sustainable.
For now, the spending wave is helping the economy grow. The report also said there is little evidence so far that AI is eliminating large numbers of jobs, despite warnings from some leading technologists.
Why could AI spending complicate the Fed’s job?
The boom has a cost side. Demand for memory and advanced chips is also feeding inflation in goods that use the same components, including consumer electronics. Apple recently raised prices on iPads and other devices, and demand has also increased for construction materials used to build data centers.
If inflation stays high, the Federal Reserve could be pushed toward raising interest rates. Higher borrowing costs would make AI projects more expensive and could slow the investment that is now giving the economy a lift.
Priscilla Thiagamoorthy, senior economist at BMO Capital Markets, called the situation a “double-edged sword” for the Fed.
This story draws on original reporting from MarketWatch.