A wave of AI-driven capital spending is buoying U.S. growth and propelling mega-cap tech stocks to record highs, even as much of Main Street faces tightening conditions. Companies tied to the AI buildout—Nvidia, Microsoft, Alphabet, Amazon and others—now comprise roughly 37% of the S&P 500, helping lift the index and the Nasdaq despite weakening consumer sectors. JPMorgan estimates AI-related capex added 1.1 percentage points to first-half GDP growth, while manufacturing remains in contraction and construction costs climb amid sweeping tariffs. On the ground, small businesses report rising import and input costs and softer demand; many are holding prices by redesigning offerings and cutting where possible. Retail and hospitality reflect the strain, with Target announcing layoffs and Starbucks and Wyndham citing a tough macro backdrop. Investors are focused on Big Tech earnings and capex guidance, while academics caution that AI efficiency gains will take time and won’t quickly offset broader softness. The split underscores a market increasingly driven by a handful of AI winners against a sluggish real economy squeezed by costs and wary consumers.
AI boom props up markets and GDP while many Main Street firms hunker down
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