Let’s go over the AI-GDP math to see how I arrive at the numbers.
Change in Real Spending in Billions of Dollars
- IP Equipment: 64.1 billion
- Software: 46.1 billion
- IP Research and Development: 11.1 billion
- Private Nonresidential Fixed Investment: 92.6 billion
Those are all BEA numbers. Because of the way the BEA calculates real numbers, the sum of the parts usually does not match the whole.
Real Private Fixed Investment
- Private Nonresidential Fixed Investment: 92.6 Billion
- Private Residential Fixed Investment: -15.6 Billion
- Private IP Equipment, IP Software, R&D: 121.6 billion.
Again, Because of the way the BEA calculates real numbers, the sum of the parts usually does not match the whole.
Gross Private Domestic Contributions
That’s the detail table of actual BEA contributions.
Nonresidential Gross Private Domestic Percentage Point Contributions
- Total: 1.39
- Information Processing Equipment: 0.83
- Software: 0.51
- Research and Development: 0.18
- IP+Software+R&D: 1.52
That bottom line is key. IP+Software+R&D provided 1.52 percentage points out of a total of 1.39 Nonresidential Gross Private Domestic percentage points.
Note that structures subtracted 0.19 percentage points.
There is no breakdown for IP-related structures, but it’s reasonable to believe that number was positive. If so, the AI-contribution was even higher.
Real First-Quarter GDP and GDI
- Real GDP: 2.0%
- Real Final Sales: 1.6%
- Real Final Private Domestic Sales: 2.5%
- Real Final Domestic Sales: 2.8%
- Real GDI: N/A
Real Gross Domestic Income (GDI) is not available in the advance (first) release of the quarter.
The difference between real GDP and Real Final Sales is Change In Private Inventories (CIPI) that nets to zero over time.
Real Final Sales is the bottom line estimate of the economy.
AI Percent Contribution to Overall Result
- Real GDP: 1.52 PP of 2.0 = 76.0 percent
- Real Final Sales: 1.52 PP of 1.6 = 95.0 percent
- Real Final Private Domestic Sales: 1.52 PP of 2.5 = 60.1 percent
- Real Final Domestic Sales: 1.52 PP of 2.8 = 54.3 percent
As a percentage of real final sales, the bottom line estimate of the economy, AI-related spending provided 95 percent of the total.
AI-related spending provided 76 percent of the topline number, and 60 percent of Real Final Private Domestic Sales, the Fed’s favorite metric.
For more first-quarter numbers, please see US Economy Expands at 2.0 Percent in 2026 Q1, a Look at the Numbers
Strip out government spending, and you are at 1.3 percent. That 0.73 PP contribution from government won’t be repeated.
Upward Pressure on Interest Rates
Yesterday, I commented There’s Upward Pressure on Interest Rates With a Slight Bias for Fed Hikes
Also note The Long Bond Yield Is Signaling a Huge Fear of Inflation
The 30-year long bond yield is just 17 BPs from a new 18-year high.
This GDP report reinforced the view that hikes are more likely than cuts.
So, good luck to incoming Fed Chair Kevin Warsh if he thinks rate cuts are coming.
For discussion, please see Powell’s Last Meeting as Fed Chair, Rates on Hold, a Dispute Over Future Bias
The Fed can say what it wants, but the price of oil is more important.
So… AI accounted for the sunny “number go up” guesstimates. And… AI spending is based on AI providers getting investments from the hardware makers, whose product orders create said sunny number guesstimates?
And we make fun of Soviet-era econo-maths!
One of our IT guys was commenting about the new revelations implementing AI. Many executives have no clue what they are doing. Software engineers are spending more time babysitting AI generated code than if they had written it without AI. They are referred to as “code janitors”. The belief is the AI response on Google searches will one day become a subscription. The original search will work, but not as fast or thoroughly as the AI. They also believe industry is setting itself up for a generation of of software engineers who cannot code. They reminisced about the Y2K problem and the lack of COBOL coders to fix the problem.
The current issue is that AI is reliant on all the current knowledge “out there” to answer a question which points out an obvious problem. What happens when new, undiscovered things/problems/issues arise for which there is no reference point?
A new virus? a new chemical? a new metal alloy? A new programming language? New hardware? Someone will need to teach AI the new stuff.
AI isn’t true artificial intelligence, it’s just a hyper copycat that can sort things into reasonable slop that passes as miracle work. It’s good, I use it daily but it does make huge mistakes at times and if you don’t know the difference it may lead to catastrophic failure in finance, engineering, medicine or whatever field is using it.
In many ways though, AI is just doing what humans do, copy off of each other with just a few true geniuses leading the world.
Not just a copycat, but a tool that can be slanted to its managers whim
(Musk/Grok)
it’s a way of affecting how you view the world
That is the point. A glorified search engine that only returns what the search engine’s owners want you to see, that invents facts that the owners want you to believe, and performs tasks that the owners want performed.
>What happens when new, undiscovered things/problems/issues arise for which there is no reference point?
Yes this is the “out of scope reasoning” problem that they haven’t been able to solve. And the billionaire AI founders will never bring it up because it makes their products look less omnipotent. They are not known for humility so we can’t have that.
As a programmer c# for about 8 years I can relate to your comments in babysitting code. I just had a new module to write and thought I’ll have ai do the entire code. Just telling it I needed a method for each part of the program. With about an hour we had a 1000 lines and it actually worked, however making changes user wanted was more difficult as I had not written the code. Now I specifically ask for things I get puzzled with, today a dropdown combobox event ended up crashing the program randomly. Turns out I needed to begin invoke as the method called another method that updated the UI with sql calls and for next loops. AI had written the method initially but I now verify every line of code to understand it and many times just say no. Deepseek solved a stray line in a bitmap method another ai had written , it was a simple size adjustment to Aline a qrcode to a multiple of 39.
The bugs ai makes tend to be subtle and hard to find. It also generates about three times as code as is needed after cleaning up and fixing the difficult to find bugs. I don’t think any time is saved.
I have found the language models be very useful for research though.
🇮🇷 🚀🚀🚀 🇮🇱 🔥🔥
TACO’s final hurrah was today … 30 April 2026.
Terminal 1982-2026 US GDP growth (and terminal Wilshire 5000 and terminal composite global equity growth) was the result of momentum private credit (continuing) mal-investment in all things AI, which simply is not ready for integrated base-economy prime time involvement..
On 30 April 2026 near the last moments of US market day-time trading, ACWI, the global equity composite ETF, reached its final apogee valuation following a 7 April 2025 53/107-108/110 day : x/2x/2x 3 phase Lammert fractal growth series.
Good luck to all. The global economy needs more than luck …
Let the bodies hit the floor
I keep wondering if this GDP ‘growth is real?
Did AI actually lead to the production of anything people want? Did in increase the supply of real goods?
Yeah, I really doubt it.
Two economists are taking a walk in the woods together.
One sees a dog turd and tells the other “I’ll pay you $100 to take a bite of that turd!” The other agrees, and a crisp new hundred dollar bill changes hands.
A little later, the second economist sees a different dog turd and offers the first economist $100 to eat that turd. He does, money changes hands.
After walk, the engineers come back satisfied. They just increased GDP by $200.
AI’s big problem now is to figure out how to pay for all those data centers.
Kids scrambling for a paper won’t
Giving away freebies won’t pay the bills
10 or 15 dollar monthly subscriptions won’t
And the AI geniuses have no idea how much computing power will be used up in a silly request
Who will go for metered billing where you only find out the cost after the fact
And how many AI centers does this country need anyway
Lotsa pain to come
And higher utility costs which will be borne by average people. The billionaires should have to absorb all the marginal cost such that there is no price increase or disruption in the quality of service provided to everyone else.
How a sudden spike in energy prices, doubtless entirely unforeseeable and unrelated to any Trump policy, would affect AI usage buildout or eventual profitability is left as an exercise for the reader.
Nonsense! They’ll just ask the AI how to turn their natural gas turbines into solar cost free.
AI only makes money by eliminating knowledge worker jobs. It’s not growth. It’s latent financial contagion. We’re overleveraging just to destroy the white collar jobs just like we destroyed the blue collar jobs in the 70s. This is the second Great Depression except it will be a Great Inflation because once this financial contagion metastasizes, they’ll do the same thing they did with Covid. This is a re-engineering of our entire society into two classes. No more upper, middle, lower. Just obscenely rich and everyone else, and a lot of people who thought they would be in the upper and middle class are going to find they’re not going to be included in this new class. If AI makes you obsolete, you’ll hang glide on your equity, savings, and other assets, but only for so long until you’re tapped out.
is not healthcare a growth sector?
https://archive.ph/OYi3c
Healthcare is growing (along with AI and various re-shoring investments).
Good link to the leftist FT hating America.
“For many, America is simply a stressful place to live. Over half the country has some kind of chronic condition, …..these types of conditions drive up healthcare costs.”
Should the folks “under stress” just leave for Mexico or Canada, etc. Many countries happy for dollars.
This is just like 2000, people are really excited and overbuilding. It’ll definitely shake out, but the tech will be around for a long time
Its alarming that the rest of the economy has been stalling for a while now
What part of the economy would you prefer “not stall”?
Consumers consume.
Investors invest.
Let the chips fall where they wish.
That said, more “stalling” in Gov’t consumption is ideal.
AI seems to be going strong still. The MAG Tech companies are projecting big CAPEX expenditures.
There are AI Datacenters being proposed all around me. I know of 9 new Datacenters that are being proposed within a 50 miles radius of where I live. Only 1 is a MAG 7 company.
In addition, 4 others DCs were built in the past 4 years by Google and Meta and Nebius.
The power consumption ranges from 300 MW to 1.1 GW.
Cost range to build these DCs ranger from 6 Billion to $150 billion. Interestingly, some of these are being funded by the mid sized cities via muni bonds.
I have actually been tracking the price of a computer Desktop the past 6 months at MicroCenter and the same model has had 3 price increases. $100, $100, $200 and now the computer is prices at $2400. Basically the cost of RAM has increase that much.
MicroCenter is a great place, customer service.
“AI Provided Nearly All the GDP Growth”
The Only Growth In The Economy Right Now Is The
Building Of The ‘Digital Prison’ – ‘Epstein’ Island PDF
‘Club’ Billionaire’s Dragging Everyone Into:
‘AI Skynet’ – Total Surveillance – Digital ID.
It’s A BIG ‘Club’ – You Ain’t In It.! (George Carlin)
And the people at the center of the hurricane are already sounding the alarm.
https://finance.yahoo.com/news/openai-ceo-sam-altman-warns-173441038.html
Ergo, the GDP mirage is mostly made up by the AI mirage.
Looks like ai is following the streaming service model. Get everyone hooked then raise the price. So may not take as many jobs as the cost starts to get close to paying a person. I would still expect wages to fall/ energy cost to go up
We’ll see what a July 4th $10/gallon headline print does for GDP 💩
People are gonna lose their minds when it hits 10 bucks. Cheap gas was bequeathed to The Chosen by Supply Side Jesus himself!
It’s $4.99/gallon here in the Midwest. Not sure it hit that price in the summer of 2022 when all the “I did that!” Joe Biden stickers were showing up on the gas pumps. It is not even May yet.
Google, Microsoft, Meta, and Amazon capex spending to hit $725 billion in 2026.
2027 is going to be a rough year.
The big short II.
Small cities will pick up when big tech does not spend. I see a lot of cities issuing bonds to fund new Datacenters.
Example. There is one city that is issuing a 6 Billion bond to build the DC. Anther 2 billion do build the power plant. Then finally a $140 billion bond to replace the GPU and servers every 5 years. Total over %150 Billion. In this scenario, the city will own the DC and leases it out Nebius to run it and Nebius leases out Compute to Microsoft.
Another small town is issuing a up toa $50 billion bond to do something similar.
These cities are just voting on the bonds so the bonds probably will be issued until the end of this year or the beginning of 2027.
Then the USA will be the AI king. All these DCs pumping out compute. The amount of new power generation is going to be crazy.
All of that crap will find its way into the corporate 401K funds and pension plans.
Artificial Intelligence creates Artificial GDP
Checkmate MFer’s 😆👙🙅👹👻💣🇮🇱🇮🇱🇮🇱
It’s a pity brain dead people are walking amongst us with internet connections and keyboards.
Go back to the OWS encampment, bro
When we work, we get paid
When AI works, the rich get paid, but we don’t
Then, get rich.
Capitalism means you have to be rich to get rich. The determining factor is which womb person chooses to bring them into the world.
In a free market [never sure what people mean by capitalism], people get rich by doing a better job of pleasing or serving their fellow man. That in the US this is only partially true is a marker of how much fascism/socialism permeates the US economy.
Yeah, and in a utopia, people are just nice to each other all the time
Too bad we live in the real world
Oh my sweet summer child…
Eat the rich. Take their stuff. Problem solved. Better society after.