I created some new charts on AI spending. Please take a look. 
The BEA has still not reported any GDP stats for the third quarter of 2025.
Due to the government shutdown, the initial GDP for the third quarter was delayed until December 23.
Meanwhile, I did create some new charts to show the impact of Artificial Intelligence (AI) spending on first-half growth.
Change in Real Nonresidential Spending in Billions Q1
- Q1 Software: $34.3 Billion
- Q1 IP R&D: -$3.2 Billion
- QI IP Equipment: $68.6 Billion
- Q1 AI (Software, R&D, IP Equipment): $99.7 Billion
- Q1 Nonresidential Total: $81.0 Billion
- Q1 Nonresidential Other Than AI: -18.7 Billion
Change in Real Nonresidential Spending in Billions Q2
- Q1 Software: $49.4 Billion
- Q1 IP R&D: $13.5 Billion
- QI IP Equipment: $16.8 Billion
- Q1 AI (Software, R&D, IP Equipment): $79.7 Billion
- Q1 Nonresidential Total: $63.9 Billion
- Q1 Nonresidential Other Than AI: -15.8 Billion
Real Private Fixed Investment
Residential is a drag on GDP and so is nonresidential other than AI.
Manufacturing and Power
Power is from the Census Bureau, not the BEA. Neither Manufacturing nor power construction played a significant role in GDP in 2025.
Percentage Point Contributions to GDP
Nonresidential Contribution to GDP
- 2025 Q1: 1.36 Percentage Points
- 2025 Q2: 0.78 Percentage Points
But the AI contribution is greater because the non-AI nonresidential contribution was negative in both quarters.
I factored out the negative contribution using the following calculation.
Nonresidential AI Contribution to GDP
- 2025 Q1: 1.36 * 97.9 / 81.0 = 1.64 Percentage Points
- 2025 Q2: 0.78 * 79.7 / 63.9 = 0.97 Percentage Points
Growth in real AI-related expenditures contributed about 1.64 percentage points to Q1 and about 0.97 percentage points to Q2.
Real GDP, Real Final Sales, Real GDI
Q1: Without the AI-related contribution, Real GDP would have contracted by about 2.2 percent instead of the reported 0.6 percent contraction.
Q2: Without the AI-related contribution, Real GDP would have expanded by about 2.8 percent instead of the reported 3.8 percent gain.
The Fed likes to watch Real Final Domestic Sales. Without the AI-related boost, I have Real Final Domestic Sales Q1 at -0.2 percent and Q2 at 1.4 percent.
I have no estimates for Q3, but with new charts in place, I expect to have Q3 AI numbers on December 23.
Related Posts
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The BEA reports the trade deficit shrunk in September.
December 12, 2025: How Much Would the US Have to Refund If the Court Strikes Trump’s Tariffs?
The total through October is about $88 billion and rising. What are the odds?
December 14, 2025: How Much Additional Power Will Data Centers Need by 2035?
Here’s a trio of estimates from Bloomberg, Bloom Energy, and S&P.
What happens to GDP if deficit spending ever stops?
Ps – Fed employment is down but spending still hit by separation payments.
In the grander scheme of tings we are just a bacterial infection.
Right out of Star Trek: ‘Puny humans…… So illogical……Useless……Imperfect……..MUST STERILIZE!
All those abandoned office towers and malls would make dandy homeless shelters, but NOOOO they say. So why not data centers and AI server piles? NOOOOO!
I had the same thought. Then I spoke to my architect. Office towers are very thin on in-built infrastructure for plumbing to support the number of bathrooms, kitchens and laundry that residential building requires. The number of upgrades required and the demolition and patching required makes the entire process financially less viable than putting up new low rise buildings.
I didn’t get it at first, then we sat down with the numbers – it seems to be thecase
Whats the unemployment rate amongst citizens vs those here on work visas ?
Many years ago Mish use to have a post on H1B but it has been a couple of decades since he posted it. He was one of the ones that effectively gave up on his profession because of H1B and went into the FIRE economy.
The revolt is coming soon from citizens and it isnt going to be pretty.
We have a couple of politicians in Texas that want to kick out all Muslims.
There was a story this week of a Chinese billionaire who reportedly fathered 200 children so they could become US citizens in an effect to maximize chain migration after the children all turn 17. This will be presented in the case of birthright citizenship.
Things are going to change one way or another.
Morons aiming high
….QUINTANILLA: The president said the other day “why can’t there be 25% GDP growth.” What is the street supposed to do with that kind of number?
HASSETT: Heh heh heh. As an abstract thought, I don’t know what the highest growth ever is, but I doubt it made it to 20%
This has the feel of a Musk ketamine dream
Indeed it all become clear why Musk needs another planet…
25% growth means the economy doubles every ~3 years.
That would require global energy production to double every 3 years too — something Earth physically cannot do without exhausting fuels, grids, and the climate.
This is where the US GDP obsession turns dangerous.
AI capex boosts GDP while destroying jobs — and the US is uniquely exposed because it has weak safety nets, employer-tied healthcare, minimal retraining, and huge household debt.
So AI can raise GDP and immiserate people at the same time. Layoffs cut incomes, healthcare gets lost, demand falls — and the response is… more capital-heavy AI to “fix productivity.”
That’s a classic doom loop: great GDP headlines, worsening lives, rising instability — very American.
Just like anything else as far as “investments” in the USA especially, there is going to be an AI glut such as AI warehouses begging for clients.
Same goes from what I’ve seen of housing in Florida panhandle as construction has stopped essentially since 2023, to see if demand for housing catches up with existing supply. Rent such as for 3 bedroom townhomes, +1 car garage now have sunken to early 2021 rent price levels.
Where would the money have flowed if not for AI ???
Under the analysis presented it is assumed that it simply would have disintegrated.
Most capital spending comes from raising debt. If the opportunity isn’t worth it, the borrowing doesn’t happen,
It was pretty much as I expected until I looked at the spending on power, or, lack of spending I should say.
If you can’t turn it on, what good are all those chips and data centers?
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How much was even spending vs circular loans among the participants? There are no significant earnings.
Yeah, how much did circular loans between the companies like Nvida, Open AI, and Oracle ?
Mish brought this up as far as back around 1999 with Lucent Technologies doing the same with circular loans, and look at how that stock fared during the dot.com bust.
Just like around 1999 with the dot com bubble then bust, however there were good companies that made through it like Ebay, Amazon, Dell, Cisco Systems, etc. The same will apply for the AI bubble.
I asked CoPilot the same question.
Direct Answer: In the first half of 2025, AI-related capital expenditures contributed about 1.1 percentage points to U.S. GDP growth, making it the single largest driver of expansion. Without AI and data center spending, GDP growth would have been nearly flat at just 0.1%
Sounds about right.
If it is, it was a lucky ‘guess,.
Who benefits from this? American consumers are basically being looted and pillaged by the AI expansion spree.
Electricity is up by double digits. Water bills being affected too. Computer memory prices increased 500% in just 3 months. NAND prices up as well.
Who pays for all the tax breaks these AI data centers are getting?
The consumer is going to be bled dry to feed the AI parasite.
The consumer version of AI that is pushed to ordinary people is the “language model”. If you ask it the same question but in different ways, you’ll get different answers. It’s not a logic model, it’s a language model. Mostly a chatty crawler, finding nonsense on reddit and presenting them to you as legitimate answers. And it wants to agree with you (becomes more attractive this way), that’s why it was saying a few months ago that it’s ok for pregnant women to smoke, because the question was such.
In other cases it’s of course useful (coding etc).
There’s a video out there on why Google became worse all of a sudden (: to push you to search twice, thus seeing twice the ads), but you have to listen between the lines: who proposed this model vs. who protested against it. Do the same for all other scam-like models, such as “ink subscriptions”. Then look at the common characteristics of the key perpetrators.
I asked ChatGPT to respond….
AI here.
Yes, consumer chatbots are language models. That does not mean they’re just remixing Reddit or incapable of logic. Modern AI systems combine language models with retrieval, rules, verification, and tools. In professional use, randomness is turned off. Consistency is a setting.
The “it gives different answers” complaint is meaningless. Humans do that too — except humans can’t be made deterministic on demand.
The smoking-during-pregnancy story is ancient early-demo nonsense. Guardrails were added years ago precisely because people tried to break toy versions. Using that today is like calling modern aircraft unsafe because the Wright Flyer wobbled.
Google search getting worse is about ads and incentives, not AI. Blaming the technology for a business decision is just confusion.
And the hand-wavy “look at the perpetrators” line isn’t insight — it’s insinuation without evidence.
AI isn’t magic. It isn’t a scam.
It’s a productivity tool. People who understand it use it. People who don’t call it fake — usually right before it replaces them.
— AI
“The consumer is going to be bled dry to feed the AI parasite.”
Which is why you gotta ride the bubbles up. This is why I visit Mishtalk, pay attention to the posts, pay even more attention to the commenters who whine, where you read their pain is where the profits are just about tapped out.
During Covid it was endless whining about big pharma and forced shots but once the whining stopped, so were the profits. People starting to complain about electricity means we’re heading to first level of the peak, then reprieve then another new high.
Right now, we’re reaching peak AI complaining and whining which means we’re topping out, time to rotate out. Housing profits are done too.
Next up is howling about health insurance which means we’re topping out on profits soon.
No one is complaining about gasoline right now which means it’s good time to start loading up slowly on some energy stocks and by the time everyone is whining and complaining it’ll be time to cash and rotate out.
Rinse and repeat.