Most US Growth Now Rides on AI—And Economists Suspect a Bubble

AI investments reportedly accounted for 92% of U.S. GDP growth in early 2025, according to Harvard economist Jason Furman. The Bank of England has expressed concerns over inflated valuations in the tech sector reminiscent of the dot-com bubble, noting that several AI companies might be overvalued. Amid this environment, Elon Musk’s xAI firm has raised $20 billion to establish a new data center, further igniting debates about whether the AI sector represents a genuine economic transformation or a bubble. Supporters argue that unlike the speculative companies of the past, current AI firms are generating substantial profits, with tech giants like Nvidia and OpenAI demonstrating significant revenue. However, critics highlight the precarious positioning of a few companies controlling a significant portion of the market, and point out that 95% of organizations are struggling with generative AI investments, suggesting a risk of future corrections. Both perspectives reflect a need for caution amidst high expectations surrounding AI's economic impact.

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