AI wasn’t the biggest engine of U.S. economic growth in 2025

The popular narrative that AI is the engine that keeps the US economy afloat appears to have been exaggerated, according to recent analysis.

The AI ​​boom has reshaped market valuations, spurred record bond issuance to finance massive investments and data centers, and greatly impacted gross domestic product, or GDP, especially in early 2025. This has led many economists and market participants to suggest: Artificial intelligence investment was a savior Otherwise, a stagnant domestic economy.

But a report published in January by Prajakta Bhide, US economic strategist at MRB Partners, finds that consumption was the most important driver of US GDP growth last year; This is often the case during periods of economic expansion. He said capital expenditures related to AI are the second biggest driver.

“AI is an important part of the growth story, but it’s not the only part of the growth story. This is a narrative that says if we didn’t have AI capex, GDP would have fallen last year. And that’s simply not true,” Bhide said in an interview with CNBC. “Yet it is the U.S. consumer that is driving the expansion.”

Bhide found that without any adjustment for imports, AI-related components contributed an average of 90 basis points, or 0.9%, to real GDP growth between the first quarter and the third quarter of 2025, or just under 40% of average real GDP growth over the period. When adjusted for actual imports of computers, peripherals and parts, semiconductors and related devices, and telecom equipment (or AI-related equipment), the net average contribution of AI-related investments is smaller; That’s between 40 and 50 basis points, or about 20-25% of real GDP growth excluding imports between the first and third quarters.

GDP consists of four components: consumption, investment, government spending and net exports. Since it measures domestic production, imports are not counted. Bhide said the GDP value of AI is smaller than suspected, given that a lot of high-tech equipment is imported.

It also found that although data centers make a lot of headlines, the most significant contribution of AI to GDP growth in 2025 is investments in software and computers.

“While a negative shock to optimism about AI represents a risk to GDP growth, the more realistic (and smaller) estimate of AI’s growth impact after adjusting for imports dispels the popular notion that the US economy would flounder without AI,” Bhide wrote in his Jan. 8 report. “Without the AI ​​boom, GDP growth would certainly have been lower last year, but there would also have been fewer imports, so overall real growth would still have been moderate at over 1.5% due to strong personal consumption.”

In December, the Bespoke Investment Group similarly brushed aside views on AI’s contribution to GDP. Publish on Xpublishes a graphic titled: “An unprecedented Q1 created vastly exaggerated perceptions of ‘AI share in the economy’.”

The firm found that in the second and third quarters of 2025, categories linked to AI spending accounted for only 15% of quarterly GDP growth, and their share of overall GDP was generally less than 5%.

There’s no official final figure for 2025 US GDP growth yet, given that annual revisions are due later, and quarterly results show a mixed picture in a year dominated by headwinds such as strong AI investment, consumer demand and volatile US tariff policies.

Real GDP increased by 4.3% annually in the third quarter of 2025, much more than expected. In the second quarter, GDP grew by 3.3% year-on-year, stronger than expected. Meanwhile, first-quarter GDP contracted by 0.3% year-on-year, marking the first quarter of negative growth since the first quarter of 2022.

Supporting a resilient economy in the future

Bhide’s research underscores the importance of consumer spending as a key pillar of economic expansion. Looking ahead, he expects resilient consumption to continue into 2026 despite slowing income growth and increasing wealth concentration among top earners in the United States.

“You have the support coming from the fiscal side, and that gives you some stability as overall revenue growth is not as strong as last year. … Our view is that the U.S. consumer is still doing well,” Bhide told CNBC.

“The argument that consumption is driven only by the rich, making consumption somehow vulnerable… we don’t find a lot of evidence of that. I don’t think the hollowing out of consumption is that much of a cyclical risk,” he added.

Bhide expects economic growth this year to be supported by more AI investment, Federal Reserve interest rate cuts and stability in the U.S. unemployment rate, helped by a collapse in immigration. It closely follows quarterly productivity statistics and employment creation rate.