"Deus ex machina"! Can AI save America?

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Artificial intelligence is playing the role of "Deus ex Machina" in the U.S. economy in unprecedented ways.

According to a report released by Deutsche Bank on September 23, the current capital expenditure boom driven by AI infrastructure construction is offsetting the negative impacts of demand shocks such as tariffs and supply shocks such as immigration policy. Data analysis by the bank shows that without spending in the technology sector, the real state of the U.S. economy would be much weaker than it appears on the surface.

This explains why tech stocks (especially the "Magnificent Seven") are performing exceptionally well, while other areas of the economy are not feeling the warmth. Just like in ancient Greek drama, where a "deus ex machina" descends onto the stage to resolve plot deadlocks and forcibly move the conclusion forward, Deutsche Bank believes that AI is propping up aggregate demand with an unprecedented surge in capital expenditures, offsetting multiple negative shocks.

At the same time, this growth model, dependent on a single engine, also brings tremendous uncertainty. The report clearly points out that current growth mainly comes from building "factories" for AI capabilities, rather than productivity improvements brought by AI itself. More critically, this "parabolic" growth in capital investment is considered "extremely unlikely" to be sustained. The report clearly states that capital expenditure growth by hyperscalers is peaking this year (2025).

AI Investment: The Engine of the U.S. Economy

Deutsche Bank strategist George Saravelos wrote in the report that Nvidia, as a key capital goods supplier in the AI investment cycle, “is currently shouldering the burden of U.S. economic growth.”

If spending on software and IT equipment and other tech expenditures are excluded from the U.S. economic indicator “real final sales to domestic private purchasers,” its growth would approach zero or fall into negative territory.

The report states that the explosive investment in AI infrastructure provides the “missing link” to the following five macroeconomic puzzles:

Decoupling of Labor Market Slowdown and Recession: Historically, a substantial slowdown in employment growth has typically been accompanied by a recession. But this time, capital deepening driven by AI does not require large numbers of workers, so economic growth on the surface is maintained even as the job market weakens.Unexpected Resilience in Global Trade: Despite the cloud of tariffs, global trade—especially the technology-driven trade of North Asia—has shown remarkable resilience. The report believes, somewhat ironically, that this is because chips have been exempt from tariffs, encouraging companies to stock up massively in advance.“Dual-Speed” Investment Cycle: Capital expenditure sentiment indicators for the broader economy remain weak, which contrasts sharply with the highly concentrated investment in data centers. This has created a “dual-speed” investment cycle: on one side, there's the booming AI infrastructure, and on the other, the generally sluggish investment in traditional industries.Tech Stocks’ Outstanding Performance: S&P 500 tech companies have significantly outperformed other sectors in profitability, with market performance continuing to be concentrated among the “Magnificent Seven” (“mag-7”). This is a direct reflection of the AI capital expenditure boom in the capital market.Persistently Mild Inflation: Given that broader economic demand remains weak, inflation has stayed at relatively low levels and has not surged across the board despite the heated investment in a few sectors.

From Infrastructure to Application: Can Growth Be Sustained?

Although AI investment is currently playing the role of “savior,” its sustainability is under serious doubt. Deutsche Bank warns that for the technology cycle to continue contributing to GDP growth, capital investment needs to maintain “parabolic” growth—which is “extremely unlikely.” Citing views from its equity research colleagues, the report states that capital expenditure growth in the hyperscaler sector will peak this year (2025).

The report raises two core mid-term questions for investors, which will also directly impact the outlook for the U.S. dollar:

Can the engine of growth successfully shift? Today's growth does not come from AI itself, but from building factories to create AI capabilities. Once the factories are built, can productivity gains from AI take over in time to become the new growth engine?How will global benefits be distributed? How broadly will the productivity dividends brought by AI be shared? Will these benefits, like the physical locations of factories, be highly concentrated, or will they spread widely around the world?

The report concludes that these are “unusual and difficult questions” that must increasingly be factored in when considering the economic outlook for next year. For investors, understanding when this round of capital-expenditure-driven growth will ebb—and when the true AI productivity revolution will arrive—will be key to navigating future market uncertainties.

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