Economy Grew 3.4% in Third Quarter on AI Equipment Spending, While a Surge in Imports Cut 3.32 Points From Growth

The U.S. economy grew at a 3.4% annual rate from July through September, the Commerce Department said Thursday, Oct. 29. That is up from 2.2% in the second quarter and above the 3% that forecasters surveyed by FactSet expected.

Two forces drove it: consumers and AI.

Consumer spending rose 3.8%. Business investment outside housing rose 12.7% and contributed 1.78 percentage points to growth. Equipment investment jumped 20.9% and added 1.16 points by itself.

Where the AI money went

Investment in information-processing equipment surged 37.4%. Software rose 9.6% and research and development rose 7.5%.

Computers and peripherals alone contributed 0.72 percentage point to GDP growth. Other information-processing equipment added 0.14. Together that is nearly nine-tenths of a point of the 3.4% from one category of spending.

Housing went the other way. Residential investment fell 3.3%, hurt by high mortgage rates, and has dropped in six of the last seven quarters. The economy has also absorbed higher energy prices tied to the fighting with Iran.

The import bill

The same report carried a number that cuts against the headline. Net exports subtracted 3.32 percentage points from growth. Imports rose at a 19.7% annual rate, and imports of goods rose 26.4%.

Harvard economist Jason Furman noted Thursday that this was the third-largest negative contribution from net exports in the quarterly series, which dates to 1947. The second-largest came in the first quarter of 2025, when businesses rushed to import goods ahead of President Trump's tariffs. The largest was the fourth quarter of 1947.

The subtraction is an accounting step. Imports are deducted so foreign-made goods are not counted as American output. The 3.4% figure already reflects it.

Breitbart's business digest argues the import surge is the AI buildout itself: American companies buying servers, chips and other gear that foreign factories make. It calls this the cost of decades of neglect of domestic manufacturing while trading partners pursued industrial policy. The accounting data cited above show goods imports and equipment investment both surging in the same quarter. The reporting here does not break out how much of the import jump was AI hardware.

The IMF's warning

The growth is real, and so is the concentration. The International Monetary Fund's World Economic Outlook, released Oct. 13 at the IMF and World Bank meetings in Bangkok, forecast global growth of 3.1% in 2026 and 3.4% in 2027.

The fund also laid out a downside scenario. A steep drop in AI investment could trigger a sharp fall in asset prices and cut global GDP by 1.1% by 2028, including 1.8% in the United States.

IMF managing director Kristalina Georgieva described the exposure bluntly. "We now have an economy that is standing on one leg, the AI leg," she told a Bretton Woods Committee event. "What if it wobbles?"

The fund's review of 14 circular financing deals in the AI sector found about $300 billion in equity investments and $650 billion in debt since 2023. In exchange, those deals carry $1.4 trillion in future revenue commitments. IMF official Jason Wu said that if monetization of AI is in question, "the equity investments will deplete in value, the debt may be difficult to service, and the revenue commitments in the future may not materialize."

IMF chief economist Silvana Tenreyro said trade in AI goods grew 29% between 2023 and 2025, more than triple the 8.3% growth in global trade overall. Without it, trade growth would have been 4.6%.

Who pays if it goes wrong

The Open Markets Institute, an antitrust-focused policy group, published a report this month arguing that the AI boom is one of the largest speculative frenzies in history. It says tech companies are spending far more on AI infrastructure than they earn from AI products and are borrowing heavily to cover it. It also claims speculative data center debt is being repackaged and sold to pension funds, endowments and other institutions in a way it calls reminiscent of the subprime bubble.

The group also faults the Trump administration and federal financial regulators, saying they are "ripping up regulatory guardrails." It wants more disclosure of AI industry finances and stronger protection for retirement savings. The administration's response to that charge is not in the report.

The Washington Post put the scale of the bet at an estimated $10 trillion in AI-related spending in coming years. It reported that even the largest technology companies are burning cash and competing to raise outside money.

There is a plain counterpoint in the data. The economy beat expectations, consumers kept spending through an energy shock, and the investment is going into productive equipment rather than consumption. Whether it pays off is what no one can yet say.

Thursday's release was the first of three Commerce Department estimates for the third quarter. The figures, including the import and investment numbers, are subject to revision.