The United States is now expanding at a pace that eclipses the early‑2000s expansion, but the surge is being driven by AI‑related assets that regulators warn could implode, threatening a sharp slowdown in global growth. Real GDP grew at an annualised 4.3 % in the third quarter of 2025 – the strongest quarterly gain since the pandemic‑driven rebound of 2020 – a rise of roughly 1.7 percentage points over the 2.6 % average recorded between 2001 and 2007. The speed of that growth, however, masks a concentration of capital in a sector whose valuations have risen about 45 % year‑on‑year, according to a Federal Reserve warning in December 2024.

The International Monetary Fund (IMF) has quantified the risk. In its April 2025 World Economic Outlook, the Fund warned that a 20 % correction in AI‑heavy equity indices could shave 0.5 percentage points off global GDP growth in 2026. A similar assessment appeared in an October 2025 Reuters report, where IMF Deputy Managing Director Pierre Gourinchas highlighted $1.2 trillion of AI‑related capital flows in 2024 and warned that “heavy leverage associated with both AI and crypto” could generate “major stress in the financial system.” The IMF’s own regional outlook for Asia‑Pacific, released on 5 January 2026, added that economies with more than 15 % of private‑sector credit tied to AI projects should build fiscal buffers of at least 3 % of GDP and tighten macro‑prudential limits.

Federal Reserve policy reflects the same caution. Minutes from the 23 November 2025 meeting recorded that four of twelve governors flagged “excessive leverage in AI‑focused venture capital” as a potential transmission channel for shocks to the banking sector. In a speech on 9 January 2026, Chair Jerome Powell outlined a two‑stage recovery plan: maintain the policy rate at 5.25 %–5.50 % through the third quarter of 2026, then begin modest 25‑basis‑point cuts each quarter, contingent on stabilising credit growth and inflation returning to 2 %. The Fed’s “silent warning” in December 2024 had already suggested that a sharp correction could force an additional 25‑basis‑point rate hike to curb a credit crunch.

Market participants are already adjusting portfolios. Large asset managers are increasing allocations to cash‑flow‑positive firms and boosting holdings of gold and Treasury securities to at least 10 % of assets as a hedge against volatility. The IMF’s global strategy calls for stronger macro‑prudential buffers and fiscal cushions, while its regional guidance recommends targeted stimulus of up to 2 % of GDP for sectors less exposed to AI bubbles, such as renewable energy and manufacturing.

The picture that emerges is one of a high‑growth economy perched on a narrow, technology‑driven foundation. If AI valuations unwind by the projected 20 %, the immediate fallout could be a modest dip in global growth, but the systemic risk lies in the leverage that links venture capital, crypto and traditional banking. Policymakers are therefore pursuing a dual approach: keep monetary policy tight enough to deter reckless borrowing, while urging fiscal authorities to build buffers that can absorb sector‑specific shocks.

The coming months will test whether the United States can sustain its 4.3 % growth without triggering the corrective mechanisms that regulators have signalled. A measured policy response, combined with prudent macro‑prudential safeguards, may allow the economy to ride out the bubble’s inevitable deflation without the kind of systemic collapse witnessed in 2008.

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