The U.S. economy is running hotter than expected—and Wall Street is celebrating. Stocks surged to all-time highs after new government data revealed GDP expanded at a 3.3% annual pace in the second quarter, beating the earlier 3% estimate and bouncing back sharply from a 0.5% contraction in the first quarter.
The rebound was driven by robust consumer spending and a surge in investment in artificial intelligence, including the construction of massive, energy-intensive data centers to support the tech boom. Analysts say these signs indicate a genuine AI-driven wave of capital spending across various industries. “This shows increasingly concrete signs of an AI-related boom in tech investment,” said Paul Ashworth, chief North America economist at Capital Economics.
Trade also played a surprising role: net exports added nearly five full percentage points to GDP, the most considerable contribution on record. Earlier in the year, businesses had scrambled to stockpile goods ahead of President Trump’s tariffs, sparking the first-quarter slump. But the latest data suggest the economy is adjusting to the new trade environment.
Corporate America is also feeling the upswing. Gross domestic income (GDI), which tracks profits and costs, leapt 4.8% in Q2 after barely moving in Q1. Company profits rose 1.7%, recovering from the steepest drop since 2020.
Still, questions remain. Economists warn growth could stall in Q3, as consumers cool their spending and tariff impacts continue to ripple. “Economic growth will likely flatline in the third quarter,” said Jeffrey Roach, chief economist for LPL Financial. That expectation is fueling calls for the Federal Reserve to cut rates, a move Chair Jerome Powell hinted could come as early as September.
For now, though, the message is clear: America’s economy is proving more resilient than many feared—thanks in part to shoppers, exporters, and an AI revolution.
