AI may be rocket fuel for US stocks, less so for GDP: McGeever
SPY•AI infrastructure spending is lifting US stocks but also driving imports that widen the trade deficit and weigh on GDP growth. The deficit reached $105.6 billion in August, while AI-related equipment spending helped push the first-half deficit to 2.7% and 3% of GDP in the first and second quarters.
1. AI imports weigh on growth
Demand for equipment used to build US AI data centers and infrastructure is surging, but much of it comes from abroad, widening the trade deficit. UN Trade and Development estimates around three-quarters of the rise in US goods imports last year was AI-related hardware, while a Minneapolis Fed paper estimated about 70% of AI-related capital spending goes to imported goods. The August trade deficit widened to $105.6 billion, as imports rose 4.3% to a record $420.8 billion.
2. Surpluses rise in Asia
The trade deficit was 2.7% of GDP in the first quarter and 3% in the second, as business equipment spending—mostly related to AI—played a key role. Point72 economist Dean Maki said the deficit could continue to expand, with AI-related capital goods imports helping explain why second-quarter annual GDP growth was only just above 2% despite equipment spending growth of more than 16%. South Korea and Taiwan had a combined annualized trade surplus of $800 billion in September, up from $100 billion two years earlier.
