Bizarre US boom: A shocking truth shows what would really happen without the AI ​​hype

The Shocking Truth Behind US Economic Resilience

The year 2025 reveals an interesting paradox of the American economy. While economists predicted a recession at the beginning of the year, the US is demonstrating astonishing resilience, albeit resting on surprisingly fragile foundations. Deutsche Bank presented a shocking finding in a remarkable analysis published in 2024: Without the massive investments in artificial intelligence, the United States would already be in or close to a recession.

AI investments as an unexpected economic driver

George Saravelos, Global Head of FX Research at Deutsche Bank, has already formulated a succinct diagnosis that casts a new light on economic developments. In his September 2024 research note, he declared that AI machines are literally saving the US economy. This assessment is based on the remarkable fact that without the enormous technology spending, the US would be close to, or already in, a recession.

Deutsche Bank warns: Fragile recovery depends on a single sector

The dimensions of current AI investments are extraordinary. The four largest tech hyperscalers, Amazon, Google, Microsoft, and Meta, recorded record capital expenditures of $244 billion in 2024, with forecasts for 2025 of approximately $300 billion. This spending is primarily going toward building AI infrastructure, data centers, and the necessary energy supply. Global AI spending is expected to rise to nearly $1.5 trillion by the end of 2025.

Particularly noteworthy is that the contribution to GDP growth from data center construction slightly exceeded the contribution from consumption spending between the fourth quarter of 2024 and the end of June 2025. This highlights the extraordinary role that AI infrastructure construction plays in economic growth.

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The paradoxical nature of the AI ​​boom

Saravelos' analysis reveals a paradoxical truth: economic growth comes not from revolutionary AI applications, but from simply building the infrastructure to generate AI capacity. This insight is crucial because it shows that the economy benefits not from the promised productivity gains of AI, but from investments in the fundamentals.

It's perhaps no exaggeration to say that Nvidia, the primary supplier of capital equipment for the AI ​​investment cycle, is currently bearing the brunt of US economic growth. Nvidia's recent $100 billion investment in OpenAI underscores the enormous sums at stake in AI poker. This partnership is designed to help OpenAI build and scale data centers with Nvidia hardware.

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The "sleight of hand" here is that the financial and business relationships between Nvidia and OpenAI seem like a "trick"—albeit a very effective one. Nvidia gives OpenAI money so that it can build new data centers. These data centers are then equipped with Nvidia's most expensive components, namely the AI ​​chips (GPUs). This means that Nvidia puts money into it—and simultaneously profits from it, because OpenAI has to buy Nvidia's products.

The key figure here is that 60–70 percent of the cost of a new data center is attributable to Nvidia chips alone. This demonstrates how central and expensive these processors are. The trick is that Nvidia partially finances its own core customers, thus ensuring that demand for its chips remains enormous.

Simply put, Nvidia is pumping money into the system, and by building new data centers, an even larger portion of the money flows back to Nvidia itself. This is a core mechanism of the current AI boom.

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The $800 billion gap as a warning signal

In parallel with Deutsche Bank's analysis, Bain & Company warns of a dramatic funding gap. AI companies will need $2 trillion in annual revenue by 2030 to finance the required computing power. However, their revenue is expected to fall $800 billion short of this target.

This discrepancy between investments and expected returns is growing exponentially. Goldman Sachs already estimates AI capital expenditures at $368 billion by August 2025, led by Amazon Web Services, Microsoft Azure, and Google Cloud. However, empirical studies show sobering results: MIT researchers found that 95 percent of attempts to integrate generative AI into companies have so far failed to deliver rapid revenue growth.

The warning about the future

The Deutsche Bank analyst expressed significant concerns about the sustainability of this development. The bad news is that capital investment must remain parabolic for the technology cycle to continue contributing to GDP growth. This is highly unlikely. This warning is particularly significant because it highlights that the current economic recovery is based on an exponential growth pattern that cannot be sustained indefinitely, both physically and economically.

The extreme concentration on a few technology companies poses systemic risks. Tech stocks have accounted for about half of the S&P 500's gains this year. Apollo Chief Economist Torsten Sløk warned of an extreme degree of concentration in the S&P 500, with equity investors dramatically overweight in AI.

America's structural advantage: The domestic market as an economic engine

While the AI ​​boom dominates current headlines, the fundamental reason for America's economic resilience lies in a much more fundamental structure: the massive US domestic market. This structural superiority explains why, even without the AI ​​hype, the US would be better positioned than its European competitors.

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The power of domestic consumption

The numbers speak for themselves: Americans drive their economy through consumer spending, accounting for a record 68.8 percent of gross domestic product, while in Germany this figure is only 49.9 percent. This fundamental discrepancy lies at the heart of American resilience and German fragility.

With over 335 million inhabitants and private consumption of over $21 trillion, the United States has the largest single item of household spending worldwide. Domestic demand contributes over 90 percent to American economic growth—a buffer that can absorb even massive external shocks. Personal spending rose by 0.6 percent month-on-month in August 2025, marking the strongest increase in five months.

Trade independence as a strategic advantage

Paradoxically, the United States is one of the least trade-oriented economies in the world, with a trade ratio of only 27 percent of GDP. By comparison, Germany has a trade ratio of between 70 and 80 percent of GDP, making it one of the most trade-dependent nations in the world.

This apparent weakness turns out to be a fundamental strength. While Germany suffers from weakening global trade – export performance fell by 6.9 percent between 2015 and 2024 – the US economy can rely on its robust domestic consumption. The US's structural trade deficit of $78.3 billion paradoxically reflects its domestic market strength – it can afford massive imports because domestic demand is so strong.

EU internal market: size without efficiency

At first glance, the EU single market, with its 450 million consumers, appears to offer Germany a similar advantage as the American market. The EU's GDP is comparable to China's and only slightly below that of the US.

However, fundamental structural differences exist that make the EU internal market less efficient. Fragmentation rather than unity is evident in 27 different governments versus a centralized US government. Despite harmonization, regulatory complexities remain due to national differences. Germany cannot benefit from automatic transfer payments like those between US states due to the lack of a fiscal union. Cultural and linguistic barriers generate higher transaction costs than in the homogeneous US market.

The fragmentation of the European market has measurable consequences. IMF economists point out that the costs of trading goods within the EU single market are three times higher than those of trade between US states. These structural inefficiencies significantly hinder European companies in global competition.

Crisis resilience in practice

This difference in structure is particularly evident in crisis situations. When the US imposed tariffs on EU goods in 2025, German exports to the US fell by 7.7 percent, reaching their lowest level since March 2022. The US economy remained largely unaffected, as the domestic market offset the losses.

German vulnerability becomes visible

Germany's dependence on the EU single market is increasingly showing its limits. 58.5 percent of all German exports go to EU countries, while 66 percent of all German imports come from the EU. Germany is losing market share in 131 of 193 importing countries. After 2019, exports contributed only 0.3 percentage points annually to GDP growth—a collapse of the German growth model.

The psychological dimension: Trump's mental influence on the economy

The phenomenon of US economic development under Donald Trump can be explained to a large extent by what German Economics Minister Ludwig Erhard recognized back at the time of the economic miracle: economics is 50 percent psychology. This insight proves to be the key to understanding the Trump conundrum—why the American economy has shown remarkable resilience despite gloomy expert forecasts.

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How long will Trump's psychological boost last?

The psychological factor manifests itself in several dimensions of the current US economic situation. Trump's communications strategy acts as a catalyst for economic expectations. His constant promises of economic recovery and a return of American jobs create a spirit of optimism among segments of the population and the business community. This positive attitude translates into real economic activity: Companies invest in anticipation of better times, and consumers continue to spend despite uncertainties.

Paradoxically, Trump's disruption strategy also has a psychologically stimulating effect. While the constant announcements of new tariffs and policy reversals create uncertainty, they also generate a form of creative tension. Companies and investors are forced to react and adapt more quickly—which, ironically, reinforces the often-praised flexibility of the American economy.

The discrepancy between mood and behavior

The discrepancy between sentiment and behavior is particularly striking. While the University of Michigan's consumer confidence index fell to 55.4 points in September 2025, actual consumer spending rose steadily in the second quarter. Americans talk pessimistically but continue to act optimistically—a classic example of how psychological factors are more complex than simple mood indicators suggest.

Trump's dwindling approval ratings as a risk factor

Political support for Trump's economic policies is increasingly eroding, threatening the sustainability of the psychological impact of his presidency. His approval ratings are now only between 40 and 41 percent, down from 50 percent when he took office. Particularly worrying is his particularly poor ratings on the economy, his central issue. Fifty-four percent of US citizens believe the economy is in worse shape, while only 31 percent give Trump high marks on the cost of living.

The America First narrative as an emotional anchor

Trump's America First narrative creates a psychological identification with economic success. The message that America is winning again mobilizes emotional resources, which translate into increased risk-taking in investments and consumption decisions. This patriotic component of economic psychology should not be underestimated—it can motivate decisions that are difficult to justify rationally.

The dynamics of expectations function as a self-reinforcing mechanism. As long as enough actors believe that Trump's policies will be successful in the medium term, they will behave accordingly, thus contributing to its actual success. This self-fulfilling prophecy explains why the economy has so far defied the apocalyptic scenarios of many economists.

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Medium-term risks and expert assessments

Economic experts' assessments of medium-term developments paint a nuanced picture, reflecting both cautious optimism and justified concerns. Experts are particularly critical of the second half of Trump's term in office. Harvard economist Kenneth Rogoff predicts that the US economy will likely slow down and experience a downturn in the second half of the year.

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The debt crisis as a structural threat

In parallel with short-term economic indicators, the American national debt is becoming an increasingly threatening structural challenge. In August 2025, the national debt reached a new high of $37.27 trillion, corresponding to a national debt-to-GDP ratio of approximately 124 percent.

The United States now has to spend over $1.1 trillion annually on interest payments alone, making interest expenses the largest expenditure item in the federal budget. Harvard economist Kenneth Rogoff even predicts a severe debt crisis within the next five years.

Labor market as a critical turning point

While other economic indicators still show strength, the labor market is showing the first clear signs of weakness. The unemployment rate rose to 4.3 percent in August 2025, its highest level since October 2021. Only 22,000 new jobs were created in August, far below the expected 75,000.

The development in key sectors is particularly alarming. The manufacturing sector lost around 12,000 jobs, while the federal government cut 15,000 positions. Nearly 100,000 federal jobs have been eliminated since the beginning of the year, highlighting the impact of Trump's austerity policies in the public sector.

Migration policy as an economic risk

Migration policy poses significant economic risks. According to estimates by the Peterson Institute, Trump's planned mass deportations could shrink the US economy by more than 7 percent by 2028. The sudden loss of workers would not only affect individual companies but could destabilize entire industries and simultaneously exacerbate inflationary pressures.

The American Enterprise Institute estimates that the Trump administration's migration policies will lead to a negative net migration in 2025 for the first time in decades. This would represent a shock to economic growth of between minus 0.3 and minus 0.4 percent of US GDP, depending on the scenario.

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When will economic psychology change?

The Trump phenomenon is likely at a critical turning point. The remarkable resilience of the American economy in the first months of his second term may prove to be the calm before the storm. The combination of growing structural problems, dwindling political support, and increasing macroeconomic imbalances suggests that a countertrend may already be underway.

The next few months will be crucial. If the labor market weakness persists, inflation continues to rise, and the debt crisis becomes more acute, the psychological foundation of Trump's economic policy could quickly erode. The American economy has proven that it has considerable self-healing powers, but these are not inexhaustible.

The psychological component also poses considerable risks. Economic psychology can quickly change if real outcomes deviate too significantly from expectations. As soon as unemployment rises noticeably or inflation puts a significant strain on household budgets, psychological support for Trump's policies could crumble—with correspondingly negative consequences for economic development.

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The critical phase of the AI ​​investment cycle

2026 is expected to be a pivotal year for the AI ​​economy. Planned investments by US companies in AI projects will exceed $400 billion by 2025. Capital expenditures by major tech companies currently amount to around 60 percent of EBITDA—a level comparable to the 72 percent achieved by AT&T at the height of the telecom bubble in 2000.

The transition from cash- to debt-financed investments always marks a critical moment in such cycles. All major recessions and downturns have been caused by private sector credit bubbles that ultimately burst. The US is still a long way from that, but 2026 is likely to be a crucial turning point: Will investments in the AI ​​economy deliver adequate returns, or will a debt-financed investment cycle with only weak returns lead into risky territory?

A fragile recovery with structural differences

The Deutsche Bank analysis reveals a bizarre truth about the US economic recovery: The economy is not being driven by revolutionary AI applications, but by the hope for them. Without the massive infrastructure investments, the US would already be in recession. This dependence on a single sector makes the economy fragile and raises questions about the long-term sustainability of the current growth model.

But the deeper reality shows that even without the AI ​​hype, the US has a structural advantage over Europe. While German exporters suffer from US tariffs, the American economy remains largely stable thanks to its strong domestic consumption. Despite the EU single market, Germany is structurally more fragile because Europe's fragmentation does not offer the same economies of scale and crisis resilience as the integrated US market.

The US benefits significantly more from its internal market than Germany does from the EU's. The American domestic market, due to its size, homogeneity, and institutional unity, offers a more stable basis for economic growth. Domestic consumption, at 68.8 percent versus 49.9 percent, demonstrates the fundamentally different orientations of the two economic areas.

Deutsche Bank's warning should be seen as a wake-up call: Economic growth based solely on exponentially increasing investments in untested technologies is, by definition, unsustainable. The question is not if, but when, this development will reach its limits. Then it will become clear whether the structural advantages of the American domestic market are sufficient to avoid a hard landing—or whether the US, too, will have to face the reality of its AI-driven speculative bubble.

The psychological component actually accounts for about 50 percent of the economy, as Ludwig Erhard recognized. As long as Trump manages to manage psychological expectations and maintain confidence in the economic future, his administration can offset even objectively problematic policies. The crucial question is how long this psychological effect will last and whether it will be strong enough to cushion even larger economic shocks. The Trump phenomenon may not have completely disappeared yet, but there are increasing signs that his time is running out. The economy is too complex to be permanently controlled by psychology and political rhetoric alone. Sooner or later, economic fundamentals will prevail, and these are increasingly pointing in a worrying direction.

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