AI investment is lifting markets faster than the broader economy

The U.S. economy is growing at just under 2%, but consumer sentiment has declined as households absorb repeated inflation shocks and draw down savings. Stock prices, meanwhile, remain near record highs, creating a widening gap between market performance and how many households feel about the economy.

High-tech capital spending, including data center construction, is driving growth while investment in housing, commercial real estate and transportation equipment contracts in real terms. The analysis says the expansion remains concentrated among a small group of large companies rather than spread broadly across the economy.

AI has produced significant productivity gains in some software tasks, but recent economy-wide productivity growth has returned toward its subdued pre-pandemic trend. With AI-related investment estimated at more than 2% of U.S. GDP, weaker-than-expected productivity gains could undermine valuations across the AI sector and weigh on the broader economy if markets decline.

Read the full story at privatebank.jpmorgan.com.