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Economist Justin Wolfers issued a stark warning in a recent CNN appearance, arguing that the U.S. is effectively operating as “two economies” where a massive Artificial Intelligence boom is concealing significant weakness in all other sectors.
He stated that without the surge in AI-related investment, the country is “on the cusp of a non-AI recession.”
“The economic data right now don’t look too bad,” Wolfers acknowledged, but he cautioned that this top-line view is deceptive. “There’s an enormous AI boom going on, huge investments, particularly in data centers,” he explained.
“If you took that out of the numbers and you just looked at the non-AI parts of the economy, it’s basically flatlining.” In a social media post sharing the clip, Wolfers credited the insight to fellow economists Natasha Sarin and Jason Furman.
Wolfers also questioned the broader benefits of the tech surge, specifically its limited impact on the labor market. He noted that the vast capital investment in AI infrastructure does not translate to widespread employment.
“That AI boom doesn’t create a lot of jobs because if you’ve ever gone inside a data center, you don’t see a lot of workers. What you see is a lot of machines,” he said.
This reliance on a narrow, capital-intensive sector leaves the wider economy in a precarious position, according to Wolfers. He suggested the overall economy’s stability is more a matter of luck than sound policy.
“We are in some sense lucky to be held up by AI right now,” he concluded, expressing concern that the positive headline numbers were occurring despite, not because of, the current administration’s economic policies.
Here is a list of a few AI-linked exchange-traded funds that investors could consider.
| ETF Name | YTD Performance | One Year Performance |
| iShares US Technology ETF (NYSE:IYW) | 20.84% | 22.79% |
| Fidelity MSCI Information Technology Index ETF (NYSE:FTEC) | 18.55% | 21.26% |
| First Trust Dow Jones Internet Index Fund (NYSE:FDN) | 13.26% | 26.02% |
| iShares Expanded Tech Sector ETF (NYSE:IGM) | 21.50% | 25.28% |
| iShares Global Tech ETF (NYSE:IXN) | 20.75% | 20.75% |
| Defiance Quantum ETF (NASDAQ:QTUM) | 28.78% | 65.36% |
| Roundhill Magnificent Seven ETF (BATS:MAGS) | 15.93% | 32.22% |
On Friday, the S&P 500 index ended 2.71% lower at 6,552.51, whereas the Nasdaq 100 index declined 3.49% to 24,221.75. Dow Jones also tumbled 1.90% to 45,479.60.
The futures of the S&P 500, Dow Jones, and Nasdaq 100 indices were trading higher on Monday.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
Photo courtesy: YAKOBCHUK V on Shutterstock.com
