Despite uncertainty over trade policy, a government shutdown and signs of a slowing labor market, U.S. stock indexes have hit record highs this month, largely driven by investments in artificial intelligence.
The largest companies in the S&P 500, most of which have ties to AI, account for a disproportionate share of profits. According to the New York Times, chipmaker Nvidia alone was responsible for around a quarter of the S&P 500's gains in the first half of 2025.
Ronnie Sadka, a finance professor at Boston College, said investments are flowing into all parts of the AI supply chain: the companies that produce the technology themselves, data centers, raw materials and companies that hope to become end users of new AI technology.
Economists at JP Morgan have calculated that AI investments contributed up to 1.1% of total US gross domestic product growth in the first half of 2025 – even more than consumer spending.
However, there are many uncertainties about how these investments will play out.
“I do think that alarm bells are ringing for people about what AI can and cannot do,” said Sadka. “The market is still trying to figure it out.”
Both Open AI CEO Sam Altman and a partner at Sequoia Capital, which invests heavily in AI, have suggested that the AI market may be in a “bubble.”
“I keep thinking about that cartoon where the guy falls off the cliff and doesn’t fall until he looks down?” said Gary Marcus, a machine learning researcher, NYU psychology professor emeritus and long-time skeptic about the economic prospects of AI. “We’re at the end of our game with AI assessments,” he said.
But even if the AI bubble bursts, a lot of money will already have been made. Construction workers were hired, concrete was poured and cloud infrastructure was purchased to build data centers.
“What we're seeing now is that big cloud companies – Google, Microsoft, Amazon – are investing in downstream companies and then buying Open AI Nvidia chips, and Nvidia is investing in Open AI, and it seems a bit circular,” said David Gray Widder, a professor at the University of Texas at Austin School of Information.
He compared cloud providers to companies that sell picks and shovels in a gold rush. “If AI turns out to be a bubble that bursts or deflates, they still made money from it,” he said.
Given the scale and scope of AI investment in the U.S. economy, an AI bust could have far-reaching implications. Many Americans invest in AI companies, intentionally or unintentionally, through pension funds and other accounts.
“I won’t be surprised if in six months or a year people start saying it’s too big to fail,” Marcus said.
Do you have questions or would you like to share personal stories about the economic impact of AI? Talk to us.
Correction (Oct. 22, 2025): An earlier version of this story misspelled David Gray Widder's name.