U.S. economic growth driven by AI-led nonresidential investment

The United States economy has maintained growth above its long-term potential since 2022, characterized by a period of full employment with jobless rates between 3.5% and 4.3%. While consumer strength and equity markets contribute to this trend, a primary driver is the surge in nonresidential investment fueled by the artificial intelligence boom.

Total nonresidential investment has risen from an annualized level of $2.7 trillion in the second quarter of 2020 to $4.6 trillion in the second quarter of this year. This investment, which accounts for 14.3% of the total U.S. economy, is expected to improve long-term productivity, growth, and wages. However, in the near term, the rapid buildout of AI resources may increase inflation and necessitate higher interest rates from the central bank.