AI Spending Is Offsetting Impacts From Tariffs, but There's a Catch

Robust AI spending is significantly impacting the US economy, with Apollo Global Management's Torsten Sløk asserting it offsets trade war impacts and drives an industrial renaissance, potentially reaccelerating growth. Conversely, Harvard's Jason Furman highlights that AI investment accounted for 92% of GDP growth in H1 2025, with other analysts suggesting overall growth would be less than 1% without it, raising concerns about the sustainability of this concentrated growth and its potential to mask underlying economic vulnerabilities if spending decelerates.

Analysis

AI spending is a dominant factor in current US economic performance, with Torsten Sløk of Apollo Global Management asserting it significantly blunts the negative impacts of trade tariffs and drives an "industrial renaissance." This robust capital expenditure, particularly in AI data centers and advanced manufacturing, is cited as a key tailwind for economic growth, potentially leading to reacceleration in coming quarters. Sløk points to downward trends in corporate default and consumer delinquency, alongside 200 factory completions since mid-2023 and a $590 billion pipeline in advanced manufacturing, as evidence of positive spillovers to industrial real estate, private credit, and employment.

Conversely, Harvard professor Jason Furman highlights the concentrated nature of this growth, noting that investment in information processing equipment and software, while only 4% of GDP, accounted for 92% of GDP growth in the first half of 2025. This perspective, echoed by Pantheon Macroeconomics estimating sub-1% growth without AI spending, raises concerns about the sustainability and breadth of the current economic expansion.

The divergence in views creates an uncertain outlook, as Deutsche Bank analysts question the economic trajectory once the current AI spending boom decelerates. While the Atlanta Fed estimates Q3 GDP growth at 3.9%, the heavy reliance on AI investment suggests potential vulnerabilities if this specific sector's capex trends shift, masking broader economic health.

Key Decisions for Investors

• Investors should closely monitor the sustainability of current AI capital expenditure trends, as a significant portion of recent GDP growth is attributed to this sector.
• Evaluate portfolio diversification and exposure to sectors beyond direct AI beneficiaries, given concerns about concentrated growth and potential vulnerabilities if AI spending decelerates.
• Consider opportunities in industrial real estate and private credit, which are identified as positive spillover beneficiaries of the advanced manufacturing renaissance driven by AI infrastructure.