AI infrastructure boom masks potential U.S. recession, analyst warns
A surge in AI infrastructure spending is boosting GDP and boosting market optimism, but some experts warn the rise could mask underlying economic weakness.
It is estimated that global artificial intelligence investment will reach 375 billion dollars in 2025 and 500 billion dollars in 2026. According to UBS. This flow of capital reshapes how and where money flows in the economy.
“This is the beginning of trillions spent building the fourth Industrial Revolution,” said Dan Ives, managing director at Wedbush Securities.
“Big tech right now is doing the equivalent of building Vegas in the 1950s, where there was only sand. Dubai 30 years ago. That’s what’s happening with the AI infrastructure that’s being built, from chips to data centers to the grid. You’re really building the economy of the future for consumers and businesses,” he added.
But some experts are skeptical about the sustainability of the AI-driven momentum.
An analysis by Deutsche Bank in September 2025 argued that without AI-related investments, the US economy could already be in a recession.
“GDP is being driven by all of these investments,” said Barry Knapp, managing partner at Ironsides Macroeconomics. “Earnings growth is coming from all these investments. S&P 500… [is] It’s pretty unstable right now. “This creates vulnerability to an investment boom at a point when we increase government spending to unprecedented levels.”
Many compare this moment to the dotcom bubble of the late 90s. Unlike the dot-com boom, when companies had very little revenue, many of today’s AI giants bring in a lot of money, but some experts worry that may not be enough to sustain the rising level of spending. Some companies are turning to the bond market to finance infrastructure expansions by issuing debt that they plan to repay later. Seer, Meta And CoreWeave each has raised billions of dollars in debt or private loans to finance new data center infrastructure.
“As we examine the rest of these incredible estimates of how much capital will be needed to build this infrastructure to prevent electricity prices from continuing to rise for the public, it will require a lot of debt over time,” Knapp said.
“The labor market looks very, very weak to me,” he added. “It is on the verge of a more significant decline.”
Despite the risks, many see a long-term upside in the current investment cycle, and bullish investors remain optimistic.
“Will there be bumps along the way? Yes, but I don’t fear this is too big to fail, given that it’s powered by technology. It’s trillions on the balance sheet and generating another $3 to $400 billion a year in cash,” Ives said.
“The reality is that there is an arms race between the United States and China,” Ives added. “And they don’t have time to slow down because China is also accelerating. And I think that’s bullish for the capex cycle, which I really see as an AI supercycle.”
watch video To learn more about how AI infrastructure spending is reshaping the US economy and what will happen if it slows down, read above.
