Is Artificial Intelligence Fueling Growth or Creating a Bubble?

Artificial intelligence has become one of the most powerful economic drivers in the United States in 2025, reshaping the way growth is measured, markets perform, and companies invest. Yet the debate over AI remains divided: is this the beginning of a sustainable technological revolution, or is the U.S. economy heading toward a bubble that could soon burst?

Few doubt the impact AI is already having. Derek Thompson, writer and co-author of the bestselling book Abundance, argues that without AI, U.S. economic growth would be “meager” and stock market returns “putrid.” In fact, about 60 percent of the stock market’s growth over the last year has come directly from AI-related companies. For investors, AI is not a distant promise—it is the central engine of present-day market performance.

The scale of investment is unprecedented. Major technology companies, including Google, Microsoft, and Meta, are pouring hundreds of billions of dollars into AI infrastructure. Estimates suggest up to $400 billion will be spent this year alone on GPUs, advanced semiconductors, massive data centers, and the electricity needed to power them. To put that into perspective, last quarter, spending on AI infrastructure contributed more to U.S. GDP growth than total consumer spending—a startling comparison given that consumer spending typically accounts for 70 percent of the economy.

This shift underscores how concentrated AI’s influence has become. The economic fortunes of just a handful of tech giants are driving market dynamics and, by extension, shaping the national economy. While consumer activity remains broad and diversified—covering everything from mortgages to gyms to groceries—the spending of a few corporate players in Silicon Valley and beyond is outpacing it in terms of economic growth.

But this massive bet raises difficult questions: is AI investment sustainable at such levels, and will these companies eventually make back what they are spending? Thompson warns that history offers sobering lessons. The late 1990s broadband buildout by firms like WorldCom, Global Crossing, and Nortel promised a connected future, yet many of those companies collapsed after overinvesting in fiber-optic infrastructure. Similarly, 19th-century railroads created transformative progress but also caused repeated financial crashes when credit bubbles burst. Even personal computing and the dot-com boom of the early 2000s followed this bubble-to-breakthrough trajectory.

By this logic, AI may be both a bubble and a lasting revolution. Thompson calls it “the most likely first technology to check both boxes at once.” The investments being made today are unlikely to produce proportional revenue in the near term. Spending hundreds of billions of dollars each year—potentially trillions per decade—on one technology cannot continue indefinitely. A correction, perhaps even a crash, appears almost inevitable.

Still, history suggests the outcome is not all doom and gloom. The internet boom ended with the dot-com crash, yet the surviving companies—Google, Amazon, eBay—went on to define the digital economy of the 21st century. Likewise, railroads, despite their bubbles, revolutionized transport and commerce. The same pattern could repeat with AI. A downturn in the late 2020s may be followed by a new era where AI companies that weather the storm emerge as dominant players shaping the 2030s.

For now, AI is redefining economic reality. Stock market gains are increasingly concentrated in the “Magnificent Seven” tech firms that dominate AI investment. The infrastructure buildout—chips, data centers, and energy grids—represents not only corporate ambition but also a massive shift in industrial priorities for the U.S. economy. Whether this proves to be a bubble or the dawn of a transformative era may not be clear for years.

What is certain is that artificial intelligence is no longer just a futuristic concept. It is actively reshaping GDP growth, corporate strategy, and market behavior today. Even if a bubble forms, history suggests the long-term impact of AI will rival that of the railroads, electricity, and the internet. In other words, short-term volatility may give way to long-term dominance, with AI poised to become the defining technology of the 21st century.

Sources: AirGuide Business airguide.info, bing.com, cnn.com/shows/fareed-zakaria-gps, Derek Thompson Abundance