Massive capital flows into artificial intelligence infrastructure are papering over severe weakness across the broader American economy, according to a stark new assessment from economist David Rosenberg. The Rosenberg Research president warned that without the concentrated investment surge in AI, the United States would likely already be in a recession.
Rosenberg, who accurately identified the dot-com and housing bubbles, stated that roughly 50% of all corporate investment is now directed toward AI-related items, growing at an annual rate of 18% in real terms. Meanwhile, he noted that capital spending in the "old economy" sectors that employ the vast majority of American workers is declining.
When you strip out the AI spend, the economy is actually very weak.
The economic data underscores this bifurcation. The U.S. economy grew at an anemic annualized rate of 1.5% in the second quarter, and job losses are surfacing in physical goods sectors. The distortion is exacerbating a domestic housing crisis, as investment capital is funneled into data centers instead of the residential construction needed to relieve pressure on American families facing record unaffordability.
For American workers outside the tech sector, the warning signs are proliferating. Rosenberg highlighted contracting activity in housing, persistent weakness in auto sales, and a declining non-tech manufacturing base. This divergence highlights the cost of economic policies that permit unbridled speculation in narrow tech verticals while neglecting the industrial and energy foundations of national strength.
Rosenberg also indicated that credit markets are beginning to flash danger, with financing costs rising and credit default swap spreads widening significantly. This financial stress on over-leveraged AI ventures threatens to expose the fragility of a job market reliant on a single speculative sector, leaving the American labor force dangerously exposed to a pullback in sentiment.