The International Monetary Fund (IMF) just dropped a bombshell on the U.S. economy, and it comes with a warning investors just can’t ignore.
The global economic watchdog forecasts U.S. GDP growth of 2.4% in 2026 and 2% in 2027, outpacing other developed economies. However, the caveat is that the strength rests on a surprisingly narrow foundation.
According to the IMF, the U.S. tech industry, powered by unfathomable AI spending levels and a red-hot stock market, continues to do the heavy lifting.
As long as AI delivers on productivity and profits that markets are expecting, things are A-ok, but what happens if it doesn’t?
For perspective, the Magnificent 7 stocks accounted for almost 33% of the S&P 500‘s weight, according to First Trust Economics, generating 42.5% of the index’s total return of 17.9%.
Additionally, RBC estimates that seven AI-exposed names, including Nvidia and Palantir, accounted for 25% of the S&P 500 market cap.
Also, the S&P 500 is trading at more than 22.2 times forward earnings, per FactSet, soaring above its five-year average of 20 times and its 10-year average of 19 times.
So clearly, something has to give, and if things don’t pan out the way Nvidia CEO Jensen Huang, Palantir CEO Alex Karp, and the rest of the AI world hope, things could get ugly fast.
U.S. growth is leading the global economy, but it’s leaning heavily on a narrow set of assumptions.
Photo by BRENDAN SMIALOWSKI on Getty Images
The IMF thinks the economy is on shaky ground
The IMF argues that today’s growth is doing a lot of work with very few supports.
At this point, momentum is primarily driven by a fixed set of drivers, with the U.S. tech sector carrying the bulk of that load.
IMF chief economist Pierre-Olivier Gourinchas noted that massive AI investments and soaring stock market valuations have effectively masked broader vulnerabilities.
Though it doesn’t guarantee trouble at this point, it does mean the margin for error has gotten much thinner.
What the IMF’s numbers say about the global economy
On paper, the global economy has held up a lot better than expected, but the strength is uneven.
- Global growth: The IMF raised its 2026 forecast to 3.3% from 3.1%, before expecting a modest slowdown to 3.2% in 2027.
- United States: Still the leader of the pack among developed economies.
- China: Expected to rise 4.5% in 2026, spearheaded by 4% in 2027, an upward revision from previous estimates.
- Canada: Forecast to post 1.6% growth, second only to the U.S. among G7 nations, jumping to 1.9% in 2027.
- United Kingdom: Growth remains muted at 1.3%, ticking up slightly to 1.5%.
- Germany: Slower still, with 1.1% growth, improving to 1.5% the next year.
The AI boom is doing more heavy lifting than many realize
Tech companies clearly represent a far bigger share of economic output than they did 25 years ago, which means even a modest reversal could hit markets hard.
For perspective, back in November, Reuters pegged Microsoft, Amazon, Meta, and Alphabet at nearly $350 billion in combined capex last year, mostly linked to AI capacity build-outs.
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Things are also heating up on the “picks-and-shovels” side, where the upstream buildout is ballooning with TSMC guiding for 2026 capex to be at $52 billion to $56 billion (roughly 30% compared to 2025), linked explicitly to AI chip demand, according to Financial Times.
Gourinchas argues that today’s setup leaves virtually no room for error.
The potential fallout could have massive implications on an international scale, too, triggering sizeable losses abroad and weighing down consumption.
On top of that, the productivity payoff isn’t here yet.
A PwC survey of more than 4,000 CEOs found just 26% cut costs, and only 30% boosted sales from AI so far.
The IMF also emphasized the critical role of central bank independence, especially since the recent criminal probe involving Fed Chair Jerome Powell jolted markets.
Why rising debt changes the risk equation
Another area of concern the IMF flagged is the growing debt usage by AI hyperscalers in financing their buildouts. However, as valuations rise, debt appears less like fuel and a lot more like unchecked risk.
- Debt is replacing patience: In 2025, Amazon, Google, Meta, Microsoft, and Oracle issued a combined $121 billion in bonds (four times their $28 billion annual average from 2020 through 2024).
- Wall Street expects more, not less: According to Bank of America’s base case, hyperscalers could issue roughly $140 billion per year going forward, with aggressive scenarios pushing issuance over $300 billion annually, Reuters reported.
- Capex is eating into cash flow: Capital spending at these companies has climbed to an eye-popping 60% of operating cash flow, estimates Apollo chief economist Torsten Slok, according to Reuters.