AI Spending Slowdown Unlikely to Trigger US Recession

Investors are increasingly worried that a slowdown in artificial intelligence spending could trigger a US recession, but analysts argue such an outcome is unlikely and would likely be mild if it occurred. The concern stems from recent disappointing earnings from major AI spenders and doubts about the financial viability of some AI companies. AI investment has contributed nearly half of US GDP growth in 2026, with tech-related spending accounting for 1.1 percentage points of the 2.3% annual growth rate. However, the Federal Reserve has room to cut interest rates to offset any demand shock, as the federal-funds rate currently stands at 3.75%-4.00%, well above the zero lower bound that would limit policy flexibility. The dot-com bust of 2001 provides the best historical analogy, with that recession proving very mild compared with the 2008 financial crisis. Unlike the debt-fueled housing bubble, today's AI buildout is largely equity-financed with few signs of financial instability, and current stock valuations are lower than at the 2000 market peak.