The U.S. economy is entering an 'efficiency era' where AI-driven productivity allows GDP to grow without a proportional increase in jobs. This structural decoupling makes traditional economic health assessments obsolete and fuels recession fears.

While there's a popular narrative about a US manufacturing resurgence, the massive capital spending on AI contradicts it. By consuming a huge portion of available capital and accounting for half of GDP growth, the AI boom drives up the cost of capital for all non-AI sectors, making it harder for manufacturing and other startups to get funded.

While aggregate gross investment numbers look strong due to the AI boom, this hides weakness in classic cyclical sectors like residential investment, construction, and industrial equipment. This divergence creates opportunities for trades like long tech/short energy, which capitalizes on the two-speed economy.

The US economy is not broadly strong; its perceived strength is almost entirely driven by a massive, concentrated bet on AI. This singular focus props up markets and growth metrics, but it conceals widespread weakness in other sectors, creating a high-stakes, fragile economic situation.

Contrary to popular belief, the US already underwent a recession in early 2024, particularly for the average consumer ("Main Street"). This was masked by the AI sector boom and soaring asset prices. Revised labor data supports this view, and the economy is now in a reacceleration phase.

Further U.S. economic acceleration is unlikely as underlying growth drivers are strained. Economic models suggest consumer consumption is 'overshooting its fundamentals,' indicating it's unsustainable. Concurrently, the incremental growth from AI-related capital expenditure is becoming harder to achieve, suggesting a potential plateau for this key investment area.

Benchmark revisions to 2025 jobs data show the labor market was significantly weaker than initially reported. This suggests a 'Main Street recession' occurred, which was papered over by massive AI capital expenditures and spending by top-percentile earners.

Despite pessimistic CBO reports, strong GDP growth, massive AI-related Capex ($600B from just four hyperscalers), and robust private sector job creation signal an economic boom. This period may be looked back upon as a new 'golden age' masked by political noise, similar to the late 1990s.

The massive capex spending on AI data centers is less about clear ROI and more about propping up the economy. Similar to how China built empty cities to fuel its GDP, tech giants are building vast digital infrastructure. This creates a bubble that keeps economic indicators positive and aligns incentives, even if the underlying business case is unproven.