The US economy is increasingly dependent on two primary growth drivers in 2026: artificial intelligence (AI) investments and consumer spending. However, Bank of America has issued a stark warning that the ongoing conflict in Iran could disrupt both, jeopardizing economic momentum.
AI Investments Fueling Economic Growth
AI capex has emerged as a powerhouse for GDP growth, with tech giants like Amazon, Microsoft, Meta, and Alphabet projected to spend up to $725 billion in capital expenditures by 2026. David Sacks, President Trump's former AI and crypto czar, estimates AI investments will contribute a 2.5% boost to GDP growth in 2026, potentially exceeding 3% by 2027. According to Federal Reserve Bank of St. Louis analysis, AI investments have already surpassed IT-driven growth during the dot-com era, contributing significantly to real GDP growth.
Consumer Spending Remains Resilient
Despite low consumer sentiment, spending has remained robust. Bank of America reports that total spending has surged at its strongest rate since early 2023, driven by services, particularly healthcare. Consumer spending accounted for 1.08% of first-quarter GDP growth, but healthcare inflation continues to pose challenges for the Federal Reserve.
Iran Conflict: A Dual Threat
The Iran war, now in its third month, threatens to derail both AI and consumer spending. Energy market disruptions caused by the conflict have led to soaring oil prices, which could create supply bottlenecks for AI development. Additionally, inflationary pressures from high gas prices and potential energy shortages could dampen consumer spending, further straining economic growth.
"The Iran war could derail both spending (via inflation) and AI capex (via energy supply bottlenecks)," Bank of America economists warned.
As the conflict continues, its ripple effects on the US economy highlight the fragility of current growth drivers in an increasingly volatile geopolitical landscape.