AI Spending Powers Economic Growth and Stock Market Gains

In 2025, the U.S. economy and stock market reached all-time highs thanks to the rise of artificial intelligence. Companies like Nvidia, Alphabet, and Broadcom have made huge investments that have helped the economy develop and pushed the S&P 500 and Nasdaq to record levels.

According to JPMorgan Chase, AI-related capital expenditures were responsible for 1.1 percent of U.S. GDP growth in the first half of 2025, making them the main driver of expansion, ahead of consumer spending. But the advantages are not equally spread out, leaving many smaller enterprises struggling with higher costs and weaker demand.

Source: Reuters

Main Street Feels the Pinch of Tariffs and Inflation

The AI boom seems far away for Cameron Pappas, who owns Norton’s Florist in Birmingham, Alabama. His firm made 4 million dollars last year, but it is struggling to stay profitable because of rising costs caused by tariffs.

80% of flowers sold in the U.S. come from other nations. The Trump administration’s tariffs on goods from Colombia and Ecuador have made his expenses surge. Pappas calls it tariff price management when he reduces bouquet sizes and changes designs to offset the higher costs.

AI Gains Mask a Slowing Real Economy

AI investments are supporting national growth, but key sectors are weakening. For seven months in a row, manufacturing expenditure has declined, and construction investment has remained stagnant due to high lending rates and tariffs on materials.

The Institute for Supply Management reports that the economy continues to contract, while Cushman and Wakefield predict construction costs will rise 4.6% year over year in the fourth quarter. AI-related stocks remain strong despite these headwinds, widening the gap between Wall Street success and the struggles of small businesses.

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Big Tech Dominates Market Value and Growth

The S&P 500 is now dominated by eight major tech firms—Nvidia, Microsoft, Apple, Alphabet, Amazon, Meta, Tesla, and Broadcom—which together account for about 37% of its total value. Nvidia alone, valued at 4.5 trillion dollars, represents more than 7% of the index.

Investors remain eager to back AI infrastructure, as Nvidia and Alphabet shares have climbed nearly 40 percent in 2025. Nvidia’s recent 100 billion dollar investment in OpenAI and Broadcom’s rapid growth continue to draw massive capital inflows into the tech sector, while consumer-focused firms lag behind.

Consumers and Retailers Face Mounting Pressure

The consumer sector presents a more difficult picture. To cope with weaker demand, companies like Target and Starbucks are cutting thousands of jobs. Target’s stock has fallen 30 percent this year, while Starbucks announced it will close unprofitable locations as part of a 1 billion dollar restructuring plan.

According to Deloitte, 57% of Americans believe the economy will worsen in the next year. Gen Z shoppers plan to spend 34 percent less this holiday season, while millennials will spend 13 percent less—the lowest forecast since 1997.

AI Leaders Expand While Layoffs Continue Elsewhere

Even within the tech industry, the AI boom has not prevented layoffs. In July, Microsoft laid off 9,000 workers, and Salesforce also reduced staff, citing efficiency gains driven by AI adoption. Experts say that scaling AI requires time, workforce adjustments, and organizational change before real productivity improvements emerge.

Hatim Rahman, a professor at Northwestern University, remarked, AI is not a plug-and-play solution. For many businesses, it will take time to achieve the full benefits.

Economists Warn of an Uneven Economic Divide

Economists caution that AI-driven corporate growth is diverging sharply from the stagnation of the broader economy. AI infrastructure continues to receive trillion-dollar valuations, while small businesses face shrinking margins under tariff and demand pressures.

Arun Sundararajan of NYU’s Stern School of Business noted, The AI economy is pushing up GDP numbers. But the rest of the economy is growing at a much slower rate.

The Path Forward: Innovation Amid Inequality

As the U.S. enters 2026, the challenge will be balancing AI-driven growth with the resilience of Main Street. Without inclusive policies that address inflation, trade costs, and consumer sentiment, economic expansion could remain top-heavy, dominated by a few AI-driven giants.

The AI surge may be transforming America’s economic story, but for many entrepreneurs, it remains a digital gold rush happening just out of reach.