U.S. economy was stagnant but for AI

Billions invested by California-based firms made up 92% of GDP growth, analysis finds.

- BY MICHAEL WILNER

SHOPPERS look for deals last month at the Citadel Outlets in City of Commerce.

Today's political consensus crosses all ages, demographics and party lines: Three out of four Americans think the economy is in a slump. It is not just in their heads. Economic growth this year has been practically stagnant, save for one exception, economists say.

Hundreds of billions of dollars invested by California-based tech giants in artificial intelligence infrastructure accounted for 92% of the nation's GDP growth this year, according to a Harvard analysis, supported by other independent economic studies.

It is a remarkable boon for a handful of companies that could lay the groundwork for future U.S. economic leadership. But, so far, little evidence exists that their ventures are expanding opportunities for everyday Americans.

"You have to watch out for AI investments — they may continue to carry the economy or they may slow down or crash, bringing the rest of the economy together with them," said Daron Acemoglu, an economics professor at MIT. "We are not seeing much broad-based productivity improvements from AI or other innovations in the economy, because if we were, we would see productivity growth and investment picking up the rest of the economy as well."

Even in California itself, where four of the top five AI companies are based, the AI boom has yet to translate into tangible pocketbook benefits. On the contrary, California shed 158,734 jobs through October, reflecting rising unemployment throughout the country, with layoffs rippling through the tech and entertainment sectors. Consumer confidence in the state has reached a five-year low. And AI fueled a wave of cuts, cited in 48,000 job losses nationwide this year.