AI continues to ride high, as potential use cases of the technology push stock valuations higher and the level of investment on behalf of technology companies grows along with it.
In fact, spending on AI infrastructure by Alphabet, Microsoft, Amazon, Meta, and Oracle — some of the biggest players in the space — is expected to top $800 billion this year and more than $1.1 trillion in 2027, according to Morgan Stanley. (1)
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The investment in and hype around AI, however, brings a fear that it could crater the U.S. economy if the industry falls flat on its face. (2) Look no further than the companies driving the S&P 500’s record highs on a seemingly weekly basis as evidence of the nation’s reliance on their growth.
At the same time, AI is skewing the picture of what’s going on in the lives of ordinary Americans who are, all the while, dealing with higher prices, slowing wage growth, and a difficult job market.
“AI’s pervasive presence makes it almost impossible to discern what is actually going on,” wrote Greg IP, the Wall Street Journal’s chief economics commentator in a recent article. (3) “It is swamping the effects of tariffs and the war with Iran, events that would ordinarily be Category 5 storms in their own right.”
The AI economy vs. how Americans really feel
If you’re an investor, you’re probably loving AI’s impact on your stock portfolio. The “Magnificent Seven” (Apple, Nvidia, Alphabet, Microsoft, Meta, Amazon, and Tesla) currently account for more than a third of the S&P’s total market cap. (4) The benchmark index is up 8% for the year, as of the end of trading on May 15.
AI’s effect on the economy is also prevalent in the latest GDP figures released by the Bureau of Economic Analysis. (5) In the first quarter of the year, business investments contributed more than consumer spending to GDP growth — fueled largely by AI investments, Yahoo Finance reported. (6)
Consumer spending, however, slowed to 1.08 percentage points in the period, compared to the 1.48 percentage points contributed to overall GDP by companies.
While still positive, those consumer gains can be attributed to services like healthcare, utilities, and transportation that people need. Spending on goods actually decreased slightly.
This isn’t a surprise. Given the impact of the Iran War on fuel prices, more Americans are being mindful about what to spend their checks on. Those paychecks also aren’t going as far, according to labor department data released this month. (7) Hourly wages, when adjusted for inflation, have dropped 0.3% year-over-year. April inflation numbers also came in at 3.8%, due to higher fuel prices.
Then there’s the labor market. The overall job market remains difficult for many even despite economic growth and low unemployment. (9)
“It is weird for us to have GDP growing at the rate it is and the hires rate be this low,” Laura Ullrich, Director of Economic Research at the job-search platform Indeed, told The Washington Post. (10)
In addition to low hiring rates, high layoff rates see many workers losing their jobs to AI. Meta, Cloudflare, Block, and Salesforce are just some of the companies that have cut jobs, citing AI as a reason. (8)
Mark Zuckerberg’s social media conglomerate, alone, will reportedly lay off about 10% of its workforce — calling the cuts a direct consequence of Meta’s AI infrastructure costs.
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AI’s here to stay in the workplace
No matter your opinion on AI, the polarizing technology is here to stay. It’s already a critical part of our everyday lives, from how we use our smartphones to algorithms that serve us recommendations on Netflix and what we see on Instagram and TikTok.
AI is more prevalent than ever in the workplace, too, according to an April 2026 Gallup survey. (11) Half of employed U.S. adults say they use AI at least a few times per year. About 13% of respondents also say they use AI on a daily basis in their roles.
Employees who use AI frequently say it improves their productivity. But as AI adoption grows, many organizations are still adjusting how they organize work and manage staffing.
Because of this, about one-fifth of respondents say it’s very likely that their jobs will be eliminated in the next five years due to AI. That number rises to 23% among workers whose companies have already adopted AI.
“Workforce changes within large organizations may shape public perceptions of AI’s impact on jobs,” Gallup said.
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We rely only on vetted sources and credible third-party reporting. For details, see our ethics and guidelines.
X (1); Fidelity Investments (2); The Wall Street Journal (3); The Motley Fool (4); U.S. Bureau of Economic Analysis (5); Yahoo Finance (6); U.S. Bureau of Labor Statistics (7); Business Insider (8); The Washington Post (9),(10); Gallup (11)
This article originally appeared on Moneywise.com under the title: $800B in AI spending is juicing GDP and stocks — while real wages fall and Americans cut back on goods
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Disclaimer : This story is auto aggregated by a computer programme and has not been created or edited by DOWNTHENEWS. Publisher: finance.yahoo.com
