President Donald Trump has framed the current state of the U.S. economy as a “golden age,” and in some ways he’s right. The stock market is at record highs, and economic growth has chugged along adequately. And depending on who you ask, it’s all being supported by one growing industry: AI.
“Polls may show that AI is not popular, but economic growth is,” said venture capitalist David Sacks. “At this point, stopping progress in AI would be equivalent to halting the U.S. economy.”
Sacks, who recently stepped down as Trump’s top crypto and AI advisor in March, pointed to the increased foothold AI is taking in the U.S. economy, and said it’s the backbone driving the GDP forward.
“In Q1, AI was already 75% of GDP growth. That trend is likely to continue,” Sacks wrote in an X post published Sunday. “Technology leadership has always been America’s great strength, and it’s driving the economy forward.”
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One way to gauge the health of the real economy is to look closely at consumer spending. The more consumers are spending, the better it implies they are feeling about their disposable income and job stability. Historically, consumer spending has been the largest single source of economic activity.
That’s still the case, according to the Bureau of Economic Analysis, which last week reported consumer spending accounted for 68.1% of GDP. But spending is no longer the primary driver of new activity, adding just 1.08 percentage points to GDP growth last quarter. Taking that crown, with 1.48 percentage points, was business investment, and these days, almost all private investment in the U.S. is tied to the artificial intelligence boom.
The economic story of Trump’s second term has been less about a manufacturing revival or job growth across the board, and mostly about AI investment. The biggest categories that received business investment last quarter were for technical equipment such as computers, and intellectual property products including software, according to the BEA. Combined, the amount invested in the first three months of the year on information processing, equipment, software, and research and development came out to 1.52 percentage points of overall GDP growth, which last quarter came out to 2%.
In other words, those crucial areas of AI-related spending so far this year account for more than three-quarters of all new economic activity.
The trends are in line with what Sacks set out to accomplish last year as Trump’s AI advisor. The investor took a largely deregulatory approach to AI governance, spearheading the administration’s AI Action Plan that called for fast-tracked AI development and rapid infrastructure buildout. Towards the end of his time in the role, he held a meeting with tech leaders and lawmakers, reported by the Wall Street Journal, where he extensively described AI as a cornerstone of the U.S. economy, lambasting efforts to slow the technology’s development for “all the damage that would do to our economic growth.”
The data—and Sacks’ comments—sit in stark contrast with some administration officials’ rhetoric regarding the state of the economy. Treasury Secretary Scott Bessent, in particular, has spent months promising a “blockbuster” year for the U.S. economy, driven by new manufacturing investments and job growth nationwide. Last fall, while visiting a rare earth mineral processing facility in South Carolina, Bessent predicted a “lift-off” for U.S. manufacturing in 2026 and 2027.
While manufacturing production has indeed ticked upwards in recent months, the jobs boom projected by Trump and his officials has yet to materialize. In fact, jobs have been disappearing at a rapid pace. Last year, the manufacturing industry lost nearly 110,000 jobs, a Senate committee reported in February.
Slow job growth hasn’t just been confined to manufacturing. Last year’s historically weak market for new jobs added only 156,000 positions, and would have been in the negative had the healthcare industry not snapped up some 375,000 new hires. The numbers have pointed to last year being one of the slowest for job growth in decades.
Which leaves AI. With the labor market as wobbly as it is, consumers would be expected to pull back on spending, resulting in slower economic activity. The former has happened, as the latest BEA data shows, but the economy is still growing. In a report last October, Goldman Sachs researchers referred to this as a period of “jobless growth,” where AI would support rising investment and productivity, leaving the labor market to grow much more slowly.
For now, the job creation tied to the AI boom is overwhelmingly concentrated in one sector: construction. A December study from the American Edge Project, a pro-tech advocacy group, counted nearly 2,800 data centers announced or under construction in the U.S., with the buildout expected to generate nearly 700,000 permanent jobs and 4.7 million temporary ones.
But even there, it’s temporary. The local economic benefits of a typical large data center decline substantially after the construction phase, according to researchers at Brookings, with long-term operational employment remaining small relative to the jobs created during building.
Much hinges on AI’s promise to boost productivity and keep the economy above water. Trump may have promised a diverse economy firing on all cylinders, but for now, it’s been a mostly one-track road with little room for error.
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