AI is keeping the US economy out of a recession (finance.yahoo.com)

Economists at recent roundtables and IMF meetings argue that AI-driven investment is the key reason the US has avoided a recession over the past two years. BNP Paribas’ James Egelhof said bluntly “AI has kept the economy out of a recession,” citing a surge in data center and chip spending. Bank of America Research estimates AI-related capex added roughly 1.3 percentage points to Q2 GDP, small-business payments for tech services rose ~7% year-over-year in September, and Goldman Sachs finds hyperscalers (Microsoft, Meta, Alphabet, Amazon) now account for over a quarter of S&P 500 capex, growing at about 75% annually. The result: booming equity valuations, higher business confidence, hiring and consumer spending at the top end — even as traditional sectors stall. That shift has important technical and policy implications. Economists say AI investment is decoupling corporate capex from the Fed funds rate because infrastructure is being financed by equity gains rather than debt, effectively “breaking” the usual monetary transmission mechanism. The K-shaped nature of the recovery — exploding data center projects versus plunging office construction — highlights widening dispersion in productivity and investment across firms. For policymakers, persistent AI-led growth complicates inflation-labor trade-offs and challenges conventional tools for cooling overheating activity, while signaling a structural reallocation toward compute-heavy industries.