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The U.S. economy continues to outperform most developed nations, supported by resilient consumer spending and a sharp rise in artificial intelligence investment, according to new institutional research from Citi. Recent data shows U.S. real GDP growth has remained in the 2% to 3% range, with nearly half of that expansion linked directly to AI-related capital expenditures.
Over the past two years, AI infrastructure spending has climbed by more than 1.5 percentage points as a share of real GDP. Major technology companies including Microsoft (NASDAQ: MSFT), Alphabet (NASDAQ: GOOGL), Nvidia (NASDAQ: NVDA), AMD (NASDAQ: AMD), and Micron (NASDAQ: MU) continue to drive demand for advanced hardware, data centers, and semiconductor production.
Citi analysts warned that the U.S. economy is becoming increasingly dependent on continued AI investment growth. If spending on AI infrastructure slows and returns to historical averages, U.S. GDP growth could weaken significantly, potentially dropping below 1% or even turning negative. Analysts also noted that a decline in equity markets tied to the tech sector could further pressure consumer spending.
Despite the rapid expansion of AI investment, job creation has remained relatively limited. Economists suggest that a slowdown in AI-related growth may not damage employment as severely as traditional economic downturns because market concerns have largely centered on AI replacing labor demand rather than expanding hiring.
Inflation trends also remain under close scrutiny. April’s Consumer Price Index (CPI) revealed strong price increases in memory chips and other technology components due to supply shortages and elevated demand. However, the Personal Consumption Expenditures (PCE) index amplified these price movements by applying tech hardware costs more broadly across consumer technology categories.
Attention is now shifting to the Federal Reserve ahead of the June FOMC meeting under new Chair Kevin Warsh. Policymakers are expected to reduce forward guidance while maintaining a cautious stance as labor market data and inflation indicators remain stable.
