Rick Rieder, Chief Investment Officer of Global Fixed Income at BlackRock, highlights that significant investment in artificial intelligence (AI) is a primary driver of US economic resilience and GDP growth, even amid signs of a broader hiring slowdown. He notes that nonresidential investment, particularly in AI, has contributed substantially to real GDP growth, with hyperscaler capital expenditures growing over 80% year-over-year and estimated to reach $715 billion in 2026. This AI-linked activity has accounted for nearly 30% of real U.S. GDP growth over the past three years.
Rieder describes this as a "two-speed economy," where AI-related sectors are thriving, but other industries are experiencing negative job growth, especially those sensitive to higher borrowing costs. He points out that while a basket of 32 AI-related companies contributed 12.0% to year-to-date S&P 500 returns, the rest of the index contributed a negative 2.3%. Data center investment alone has reached an estimated $1.5 trillion, annualizing at $214 billion per year, which he contrasts with historical major infrastructure projects like the Interstate Highway System ($620 billion) and the Apollo Program ($257 billion).
Despite the economic strength from AI, Rieder cautions that the labor market benefits are uneven. While some sectors show annualized job growth of 1.63%, others have seen a decline of -0.29%. He notes that AI has led to layoffs, accounting for 26% of total job cuts in April, with the technology sector announcing 33,361 job cuts. However, he dismisses the notion of an AI "bubble," citing robust forward earnings growth in semiconductor companies, arguing that bubbles typically lack such fundamental support.
Rieder also suggests that the Federal Reserve is unlikely to raise interest rates following the July jobs report, given the shifting economic landscape. He believes that while investment in AI is real, the easiest part of owning it has likely passed, and the rate of change in capital expenditures and earnings growth may eventually slow, a shift markets tend to price in proactively.
BlackRock's view emphasizes that while the AI investment cycle is substantial and driving economic performance, its benefits are concentrated, creating a divergent economic experience across sectors and a potentially more deliberate approach to fixed income.
