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US economy expands 2% on AI spending surge amid Iran war, inflation ...
The US economy expanded 2 per cent in the first quarter of 2026, driven by a surge in AI-linked business investment and steady consumer demand, even as the Iran war pushed inflation higher to 3.2 per cent amid rising energy costs and global uncertaintyThe US economy grew at an annualised 2 per cent in the first quarter of 2026, driven by a surge in artificial intelligence-linked investment and resilient consumer demand, even as the Iran war pushed up energy prices and lifted inflation pressures to a two-year high.According to the Bureau of Economic Analysis, growth in the January–March quarter was anchored by a strong expansion in business investment, particularly in technology infrastructure tied to the ongoing AI buildout. Inflation, meanwhile, accelerated on rising fuel costs linked to geopolitical disruptions in West Asia.STORY CONTINUES BELOW THIS ADAI investment emerges as key growth engineBusiness investment surged 10.4 per cent in the quarter, marking the fastest pace in nearly three years and emerging as the primary driver of GDP growth. Spending was concentrated in information processing equipment, software and data infrastructure, reflecting aggressive AI-related capital expansion across corporate America.The investment cycle is being powered by Big Tech’s escalating AI arms race. Recent earnings from major US technology companies show combined AI-related capital expenditure is now projected to exceed $700 billion in 2026.More from Business Alphabet led the sector with a 63 per cent surge in Google Cloud revenue, its strongest growth on record, while Microsoft Azure grew 40 per cent and Amazon Web Services rose 28 per cent.Across the sector, capital intensity remains elevated. Alphabet has raised its 2026 capex forecast to as much as $190 billion, Microsoft has outlined nearly $190 billion in spending plans, Amazon continues to invest close to $200 billion annually, and Meta has lifted its capex guidance to as high as $145 billion.This wave of investment is feeding directly into US economic activity through equipment purchases, data centre construction and software deployment, making AI one of the most important contributors to growth in the current cycle.Consumption steady, trade drags on growthConsumer spending rose 1.6 per cent, supported by services such as healthcare and financial activities. Government expenditure also rebounded after earlier disruption, helping offset weaker external demand.However, net exports subtracted from growth as ...
The AI Gold Rush Hasn't Gone Full Bubble, Says Goldman Sachs
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Goldman Sachs warns AI buildout is fueling inflation pressures
Goldman Sachs estimates that AI-related spending has added 0.3 percentage points to core PCE inflation and 0.1 points to core CPI over the past year, with similar pressure expected ahead. The ...
Goldman Sachs Warns AI Disruption May Impact Long-Term Value of US ...
Goldman Sachs warns that AI disruption poses a risk to US stock values. Long-term growth forecasts, crucial for company worth, are now uncertain.
