Without data centers, GDP growth was 0.1% in the first half of 2025, Harvard economist says

Harvard economist Jason Furman calculated that 92% of U.S. GDP growth in the first half of 2025 stemmed from investment in data centers and information processing technology, primarily fueled by the AI boom, with growth otherwise at a mere 0.1% annualized rate. This significant capital expenditure by hyperscalers, approaching $400 billion annually, is estimated to contribute roughly 100 basis points to U.S. real GDP growth, according to Morgan Stanley. The tech-driven surge effectively masks underlying economic sluggishness and slow job creation, prompting concerns among analysts about the true health and sustainability of the broader economy.

Analysis

U.S. GDP growth in the first half of 2025 was overwhelmingly concentrated in technology infrastructure, with investment in data centers and information processing technology accounting for 92% of the total expansion. Harvard economist Jason Furman calculated that without these contributions, annualized GDP growth would have been a mere 0.1%, highlighting a significant reliance on the AI boom. This sector, though only 4% of U.S. GDP, disproportionately drove nearly all growth.

Hyperscalers such as Microsoft, Google, Amazon, Meta, and Nvidia are fueling this surge, with annual capital expenditure on data centers nearing $400 billion. Morgan Stanley estimates this massive spending adds approximately 100 basis points to U.S. real GDP growth, underscoring the pivotal role of a few tech giants in current macroeconomic performance. This concentrated investment has also surpassed consumer spending's contribution to GDP growth for the first time.

Despite robust headline GDP figures, the underlying economy exhibits sluggishness, with slow job creation and weak performance across other sectors. This disparity has led to concerns about the sustainability and breadth of economic growth, with some analysts, including Jeff Bezos, raising "industrial bubble" fears regarding the scale of data center investment. The overall market sentiment is mildly negative and uncertain, reflecting these underlying concerns about economic breadth.

Key Decisions for Investors

• Investors should critically assess their portfolio's concentration in AI-related infrastructure and hyperscaler stocks, recognizing their outsized contribution to recent GDP growth and potential for sector-specific volatility.
• Monitor broader economic indicators beyond headline GDP, such as non-tech sector performance, job growth, and consumer spending, to gauge the true health and sustainability of the U.S. economy.
• Given concerns about an "industrial bubble" and economic narrowness, consider diversifying investments or implementing hedging strategies to mitigate risks associated with over-reliance on the tech sector.
• Evaluate the long-term demand drivers for AI infrastructure and the potential for oversupply or diminishing returns on investment, which could impact future growth contributions from these companies.