US Economy's Growing Reliance on AI Data Center Boom Raises Concerns Among Economists

AI Infrastructure Fuels Significant US Economic Growth

The United States economy has seen a substantial boost from the rapid expansion of Artificial Intelligence (AI) data centers. In the first half of 2025, AI infrastructure investment accounted for approximately 50% of the inflation-adjusted GDP growth. Some analyses, including one by Harvard economist Jason Furman, suggest that without these investments, US GDP growth would have been considerably lower, with AI-related investment contributing as much as 92% of the country's GDP growth in that period.

Major technology companies, including Microsoft, Amazon, Alphabet, and Meta, are at the forefront of this investment surge. These four firms alone are projected to spend $344 billion on capital expenditures in 2025, a figure equivalent to 1.1% of GDP, and an increase from $228 billion in 2024. This spending is anticipated to rise further to $404 billion in 2026. The construction sector has directly benefited, with data centers now representing about 35% of Turner Construction's project backlog, a significant jump from 13% five years ago.

Economists Warn of Over-Reliance and Market Risks

Despite the economic stimulus, a growing number of economists are voicing concerns about the US economy's increasing dependence on the AI data center boom. Peter Berezin, Chief Global Strategist at BCA Research, has indicated that 'it's certainly plausible that the economy would already be in a recession' without the AI boom. Stephen Juneau, an economist at Bank of America, has noted that AI investment is 'the only source of investment right now' outside of AI-related sectors.

Concerns include:

• Potential for Economic Vulnerability: A slowdown or correction in AI investment could expose deep economic vulnerabilities, potentially triggering a recession.
• Market Volatility: High stock valuations in AI-related companies and the 'wealth effect' (where rising stock prices boost consumer spending) create a risk. A significant market correction, such as a 20-30% fall in stock prices, could reduce GDP growth by 1 to 1.5 percentage points.
• Debt Accumulation: Companies like Oracle and CoreWeave are taking on substantial debt to finance AI infrastructure, raising questions about potential instability in credit markets if revenues do not keep pace with borrowing.

Environmental and Infrastructure Strain

The rapid growth of AI data centers is also placing considerable strain on critical resources and infrastructure:

• Energy Consumption: Data centers accounted for 4% of total US electricity use in 2024. This demand is projected to more than double, reaching 426 terawatt-hours (TWh) by 2030, a 133% increase. Some forecasts suggest data centers could consume over 10% of total domestic electricity by 2030. This surge strains power grids, leading to rising utility bills and potential delays in energizing new facilities. Natural gas currently supplies over 40% of the electricity for US data centers.
• Water Usage: AI data centers consumed approximately 17 billion gallons of water in 2023. Projections indicate this usage could surge to 68 billion gallons by 2028, representing a staggering 300% increase in just five years. A typical data center can use 300,000 gallons of water daily, with larger facilities consuming up to 5 million gallons, equivalent to the needs of a town of 50,000 residents. This demand places significant pressure on water supplies, particularly in arid regions where many data centers are located.
• Supply Chain and Cybersecurity: The intense construction activity is straining supply chains for essential components, leading to extended lead times. Furthermore, data centers, as critical infrastructure, are increasingly becoming targets for cyberattacks, posing risks of significant financial losses and cascading system failures.

The dual nature of the AI data center boom presents both a powerful engine for economic growth and a source of significant concerns regarding sustainability, economic stability, and resource management in the United States.