AI Is Distorting Practically Everything About the Economy

AI is like a hurricane-strength weather system making itself felt across the entire economy. 

It is distorting the stock market, profits, the speed and composition of economic growth, trade and even our moods—especially about the job market.

It is swamping the effects of tariffs and the war with Iran, events that would ordinarily be Category 5 storms in their own right.

The boom itself is in uncharted territory. Morgan Stanley now sees capital spending by the five largest AI “hyperscalers” topping $800 billion this year and $1.1 trillion next year.

This raises a fascinating question: What if the AI boom went away? Not the technology itself, which is here to stay, but the accompanying frenzy.

My back-of-the-envelope estimate is that the AI economy grew 31%, the non-AI economy just 0.1%. 

A lot of AI spending goes toward imported equipment such as advanced semiconductors, rather than toward domestic production. 

Taiwan’s trade surplus has reached an almost unthinkable 24% of GDP. Kospi, the South Korean stock index—home to semiconductor giants Samsung Electronics and SK Hynix—is up 78% this year. 

Magnificent Seven, tech companies that account for over a third of its market capitalization, have stormed back. The index is up 7% since the start of the Iran war. Weighting all 500 companies equally, the index actually fell slightly.

AI thus feeds the disconnect between what the data say and how people feel. It lifts the spirits of businesses and investors, while doing the opposite for ordinary workers. 

Greg Ip Wall Street Journal May 7, 2026

https://www.wsj.com/tech/ai/ai-is-distorting-practically-everything-about-the-economy-4ca6fcff

The stock market is at all-time highs powered by an extraordinary rally for semiconductor stocks.

https://englundmacro.blogspot.com/2026/04/the-stock-market-is-at-all-time-highs.html

 8 maj

https://englundmacro.blogspot.com/2026/05/8-maj-iran-privat-credit.html