The AI Investment Boom: Economic Impact and Portfolio Risks

The U.S. economy has continued to grow despite economic headwinds, supported in part by a surge in artificial intelligence (AI) investment. Major technology companies are committing hundreds of billions of dollars to the infrastructure needed to develop and deploy AI, with effects reaching well beyond the technology sector and into financial markets. 

This raises two questions: how much is AI spending contributing to growth, and what happens if it slows? Below, we look at both, along with the financing risks and what they may mean for your portfolio.

AI Investment and Economic Growth

Businesses are investing heavily in chips, servers, data centers and related equipment. Major technology companies are expected to spend approximately $800 billion in 2026, ¹ and some estimates suggest AI investment has accounted for as much as one-third of recent U.S. economic growth. ² 

The impact extends across industries. Building and operating data centers drives demand for construction, electricity, equipment and raw materials. In addition, companies viewed as AI leaders have contributed to stock market gains, which can increase investor wealth and potentially support consumer spending.

For now, AI investment remains an important source of economic activity. The open question is whether companies can sustain current spending levels and ultimately generate enough business value to justify the cost.

Economic Risks of Slower AI Investment

Concerns are growing about the cost of AI infrastructure and how long it may take to produce meaningful returns. Data centers require significant upfront spending, and companies must weigh those costs against the revenue and productivity gains AI may eventually deliver. Investor scrutiny is also rising as companies seek outside funding to support expansion, which makes investor confidence an increasingly important factor.

A slowdown in AI spending would not necessarily trigger an economic downturn, but it could have consequences beyond the technology industry. Semiconductor manufacturers, equipment suppliers, construction firms and energy providers could all be affected, and if those businesses scale back hiring and investment, the impact could spread more broadly through the economy.

Stock markets could also feel the effects, particularly if expectations for future AI growth decline. However, the relationship between AI spending and overall economic performance is not one-to-one, and strength elsewhere in the economy could offset some of the impact.

Debt, Private Credit and Financial Risk

How AI investment is financed also matters. Companies may use cash, issue stock, borrow money or raise capital from outside investors. Borrowing can accelerate growth, but it creates obligations that must be met even if revenue falls short of expectations.

Private credit, which consists of business loans typically made by investment funds and other nonbank lenders, has become a significant source of financing. Compared with publicly traded bonds, these loans are generally harder to buy and sell, and information about their value and borrowers' financial health may be less available. 

The Financial Stability Board estimates that global private credit assets total approximately $1.5 trillion to $2 trillion, ³ and it has raised concerns about borrowing levels, limited transparency and links between private credit funds and other financial institutions.

These issues become more relevant as AI infrastructure expands. Data centers and related projects often require substantial upfront investment, sometimes funded with borrowed money. If AI spending slows, returns disappoint or borrowing costs rise, heavily indebted companies could face financial pressure. Lenders and investors could also be affected, potentially making financing harder to obtain for other businesses.

That said, the growth of private credit does not by itself signal a financial crisis. These loans are an important alternative source of funding, and risk varies by borrower, loan terms and cash flow. The Federal Reserve's May 2026 Financial Stability Report noted that overall business and household debt relative to the size of the economy had declined, although some higher-risk borrowers continued to struggle with debt payments. ⁴

For investors, the concern is how these risks could interact. A slowdown in AI investment, combined with tighter lending conditions and weaker economic growth, could increase market volatility, and companies with heavy debt or limited access to cash may be especially vulnerable.

What This Means for Your Portfolio

AI presents both opportunities and risks for investors. Continued investment and broader adoption could support productivity, business growth and corporate profits. At the same time, high expectations and significant spending create the potential for disappointment if the financial benefits take longer to materialize than anticipated. 

It is difficult to predict which companies will benefit most from AI, and which may struggle, and the technology's reach across a growing range of industries makes its full market impact hard to assess. Slower investment could weigh on economic growth, while successful adoption could help businesses operate more efficiently and support future growth. These outcomes are not mutually exclusive and may unfold at different speeds across industries, which keeps the overall outlook uncertain.

Rather than trying to predict the next phase of the AI boom, investors can focus on what they can control: maintaining appropriate diversification, understanding their exposure to technology and other growth-oriented investments, and ensuring their portfolios reflect their goals, time horizons and risk tolerance.

The bottom line: AI is an important force shaping today's economy and financial markets, but it is only one part of the investment picture. A well-diversified portfolio can help you participate in potential opportunities without relying too heavily on any single company, sector or market trend.

If you have questions about how AI investment, economic conditions or changing market risks may affect your portfolio, please reach out. We would be glad to review your current allocation and discuss whether it remains aligned with your long-term goals.

Sources

1. J.P. Morgan Asset Management, How Much of the AI Boom Is Adding to U.S. Growth?
2. ING Think, How Much Is AI Contributing to U.S. Economic Growth?
3. Financial Stability Board, Report on Vulnerabilities in Private Credit
4. Federal Reserve, Financial Stability Report, May 2026