Economist Peter Schiff argues that AI investment is the only factor that is keeping U.S. economic growth positive, and removing that spending would result in a recession.
Schiff took to X and argued that “AI CapEx is the only reason GDP is even positive.” He linked a recession to easier monetary policy, warning that such measures would be bearish for bonds, but “not bearish for gold, gold miners or silver.”
In another video, he also discussed the “bad” October consumer inflation, arguing that it reflects the Federal Reserve’s inability to contain rising prices because the U.S. government cannot afford the high interest rates needed to control inflation. He blamed excessive government spending for the affordability crisis, warning that mounting fiscal pressures could trigger a broader economic collapse, potentially before the next presidential administration.
“We’re now in the final stages of this collapse,” he said, adding, “The whole thing can implode.”
Economists Warn of AI-Driven Bubble Risks
Schiff had previously warned that rising borrowing costs could undermine AI investment and expose broader economic weakness. Former Fed adviser Danielle DiMartino Booth has similarly warned that a recession may already be underway, citing falling Treasury yields and mounting credit stress among AI companies. However, a prediction-market analysis showed only a 7% chance of a 2026 recession, although traders assigned greater recession risk to 2027.
Notably, the U.S. economy expanded at a 3.4% annualized rate in the third quarter, beating economists’ 3.2% forecast and accelerating from 2.2% growth in the second quarter, according to the BEA’s advance estimate.
NYU professor Scott Galloway warned that the AI infrastructure boom resembles the 1999 dot-com bubble, arguing that trillions of dollars in data-center and chip investments increasingly depend on demand from just two companies: OpenAI and Anthropic. He cautioned that this concentrated customer base could make the massive AI capital spending vulnerable.
Criticizing President Donald Trump‘s policies related to immigration, Iran war, and tariffs, Mark Zandi, chief economist at Moody’s, in August had said something similar to Schiff’s remarks, “The only reason why the economy isn’t in complete shambles is because of AI.”
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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