The AI Boom Is Driving GDP Growth

Summary

WSJ What’s News – PM Edition
Episode: The AI Boom Is Driving GDP Growth
Date: April 30, 2026
Host: Alex Osola

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Episode Overview

This episode delves into the unexpected drivers behind the latest U.S. GDP growth, with a particular emphasis on surging business investment in artificial intelligence (AI) and its implications for the broader economy. The episode also analyzes the symbolic breach of the U.S. national debt exceeding GDP, significant developments in the health insurance market, and notable political moves in Washington. Through expert interviews and rapid-fire market updates, the episode explores how technology, fiscal policy, and government decisions are intersecting to shape the current economic landscape.

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Key Discussion Points & Insights

1. GDP Growth Powered By AI Investment

(00:34–04:20)

• Headline Data: U.S. GDP rose at a 2% annualized rate in Q1 2026, up from 0.5% at the end of 2025 but slightly under economists' expectations.
• Consumer Spending:
  • Slowed to 1.6% growth (from 1.9% in Q4 2025).
  • “People are being increasingly cautious. We are in this environment where income growth is decelerating and inflation is accelerating.” – Greg Dacko, EY Parthenon (01:42)
  • Bifurcation: Affluent consumers maintain spending; lower/median income households face greater pressure.
• Inflation Pressures:
  • Gas prices have surged 44% since the start of the Iran war.
  • Higher gas prices are pushing up costs across transportation, airfare, and food.
  • “We're going to see these higher energy prices filter through... The inflation landscape is going to be more restrictive in terms of consumer spending capacity.” – Greg Dacko (02:21)
• Business Spending Soars:
  • Jumped more than 10%, far outpacing consumer activity.
  • Driven mainly by investments in AI: info & processing equipment, R&D, software, and intellectual property.
  • “Firms that are extremely focused on AI investment... are driving most of the momentum.” – Greg Dacko (03:07)

2. Fragility of Growth and Economic Risks

(03:40–04:17)

• Concentration Concern:
  • Heavy reliance on three “fragile A pillars”: Affluent consumers, AI Investment, Asset Price Appreciation.
  • “It is a risk…if there is a shock to one of these pillars, it will expose underlying fragilities in terms of economic momentum.” – Greg Dacko (03:45)
  • Outside AI, businesses show hesitation in hiring and non-tech investment.

3. U.S. National Debt Surpasses GDP

(04:21–05:36)

• Milestone: U.S. national debt now exceeds 100% of GDP; government is spending $1.33 for every $1 of revenue.
• Budget Flexibility Shrinking:
  • “It gives the government less room for maneuver…as more and more money is dedicated to…servicing the debt, there’s less money to spend on actual things the government does.” – Spencer Jacobs, WSJ (04:54)
• Deficit Anomaly:
  • “The budget deficit as a share of GDP today is at a level that you typically only see during deep recessions…not in the middle of a boom like we're having now.” – Spencer Jacobs (05:21)

4. Market Momentum Fueled by Tech & AI

(05:36–07:21)

• Market Run:
  • Dow up 1.6%; S&P and Nasdaq post best months since 2020 (Nasdaq up 15%, S&P up 10% for April).
• Corporate Highlights:
  • Alphabet, Qualcomm, Caterpillar all cite AI spending as key business boosters.
  • Meta and Microsoft shares fall on concerns about high AI buildout costs.
  • Apple exceeds sales expectations, with iPhone revenue rising over 20% ($57B).
  • Eli Lilly reports soaring profits from its weight-loss drugs (Mounjaro, Zepbound).

5. Health Insurance Market in Turmoil

(07:53–10:18)

• Cigna Exits ACA Market:
  • Latest in a series of exits, following Aetna, prompted by subsidy losses and rising costs.
  • “Since the start of the year, a lot of people have just not paid and have been dropping out...Actuaries…projecting that overall enrollment could drop by maybe a quarter this year…” – Ana Wilde Matthews (09:31)
  • As premiums rise, most enrollees are still shielded by subsidies, but instability is growing.
• Regulatory Impact:
  • Insurers filing for significant premium increases for 2027.
  • DOJ launches health care fraud strike force, targeting Medicare/Medicaid fraud (10:18).

6. Washington and Political Developments

(07:53–09:31)

• Homeland Security Funding:
  • House passes bill funding most of DHS (excluding ICE); ICE/Border Patrol funding to be debated separately.
• Surgeon General Nomination:
  • President Trump withdraws Casey Means nomination, names Nicole Safire instead.
• Senate Race in Maine:
  • Gov. Janet Mills drops Senate bid, leaving primary open for progressive candidate Graham Platner, who will face incumbent Republican Susan Collins.

7. Noteworthy, Lighthearted Closer

(10:40–10:43)

• ‘The Apprentice’ Reboot Rumors:
  • Amazon is in preliminary talks to reboot the Trump-era reality show, possibly starring Donald Trump Jr.
  • No active development confirmed.

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Notable Quotes & Memorable Moments

• “People are being increasingly cautious. We are in this environment where income growth is decelerating and inflation is accelerating.”
  — Greg Dacko (01:42)
• “We're going to see these higher energy prices filter through... The inflation landscape is going to be more restrictive in terms of consumer spending capacity.”
  — Greg Dacko (02:21)
• “Firms that are extremely focused on AI investment... are driving most of the momentum.”
  — Greg Dacko (03:07)
• “It is a risk…if there is a shock to one of these pillars, it will expose underlying fragilities in terms of economic momentum.”
  — Greg Dacko (03:45)
• “It gives the government less room for maneuver…as more and more money is dedicated to…servicing the debt, there’s less money to spend on actual things the government does.”
  — Spencer Jacobs (04:54)
• “The budget deficit as a share of GDP today is at a level that you typically only see during deep recessions...not in the middle of a boom like we're having now.”
  — Spencer Jacobs (05:21)
• “Since the start of the year, a lot of people have just not paid and have been dropping out...Actuaries…projecting that overall enrollment could drop by maybe a quarter this year…”
  — Ana Wilde Matthews (09:31)

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Timestamps for Important Segments

• 00:34 – GDP beats expectations, introduces AI-driven surge
• 01:42 – Greg Dacko on consumer spending pressures and bifurcation
• 02:21 – Greg Dacko on inflation, gas prices, and consumer constraints
• 03:07 – Breakdown of AI-dominated business spending
• 03:45 – Risks of growth concentration in AI, affluent consumers, and assets
• 04:21 – U.S. national debt surpasses GDP: fiscal consequences
• 05:36 – Market updates and how AI shapes corporate earnings
• 07:53 – ACA health insurance market turbulence and insurer exits
• 09:31 – Ana Wilde Matthews on enrollment decline and market instability
• 10:18 – DOJ health care fraud strike force launch
• 10:40 – Amazon discusses rebooting The Apprentice with Donald Trump Jr.

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Takeaways

• The AI investment surge is powering U.S. economic growth, but reliance on tech and affluent spending is creating a fragile underpinning.
• Persistent inflation—especially from energy prices—continues to erode household purchasing power and fuel cost-of-living pressures.
• The symbolic crossing of the national debt above GDP highlights mounting fiscal risks and the limits of government flexibility.
• Health insurance markets face uncertainty, with major players exiting the ACA and premiums rising, though subsidies mute the impact for many.
• Political developments and corporate earnings are closely tied to these macroeconomic trends, creating a shifting landscape for investors and policymakers alike.

Transcript

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[Alex Osola]

First quarter GDP gets a big boost

[Greg Dacko]

from business Spending we have firms that are extremely focused on AI investment and they're driving most of the momentum.

[Alex Osola]

And the US national debt now exceeds gdp, a once unthinkable threshold. Plus, the House approves a bill to fund most of the Department of Homeland security, but not ice. Alex It's Thursday, April 30th. I'm Alex Osola for the Wall Street Journal. This is the PM edition of what's news, the top headlines and business stories that move the world today. A new piece of important economic data came in today. GDP it rose at a 2% rate in the first quarter. That's better than the half a percent from the end of last year when government shutdown was a big drag. But but the first quarter was still a bit lower than economists expected. To dig into what's behind the numbers, I'm joined now by Greg Dacko, chief economist at EY Parthenon. GREG the economy's main engine, of course, is consumer spending that softened in the first quarter to 1.6% from 1.9% in the fourth quarter. What's driving those changes and what do we know about how people are spending now?

[Greg Dacko]

I think in general, people are being increasingly cautious. We are in this environment where income growth is decelerating and inflation is accelerating. So spending power is diminishing and that is increasingly, finally a restraint on consumer spending activity. The encouraging thing is that we have a bifurcated consumer landscape. So affluent consumers are still doing their fair share of spending but lower to median income. Households are increasingly struggling in the face of these headwinds, and as a result, they're spending at a slower clip.

[Alex Osola]

Since the end of February, when the Iran war started, gas prices have increased 44%. Does that mean that we're going to be seeing even more pressure on consumer spending moving forward?

[Greg Dacko]

We are going to continue to see the pressures from the Middle east conflict affect consumer spending in a negative way. Now, in the first quarter, we were encouraged by the fact that we had higher than usual tax refunds coming from the one big beautiful bill. But those were largely offset by the higher cost of gasoline, and they will continue to be offset by these higher prices. And we're going to see these higher energy prices filter through to transportation costs, filter through to airfare, and also filter through to higher food prices. The inflation landscape is going to be more restrictive in terms of consumer spending capacity.

[Alex Osola]

One of the other things we saw in the numbers today was that business spending picked up a lot during the quarter. It rose more than 10%. What kind of businesses are doing that spending and what are they spending on?

[Greg Dacko]

We have essentially a bifurcated landscape when it comes to business investment. We have firms that are extremely focused on AI investment and they're driving most of the momentum. In fact, if you look at the GDP data for the first quarter, you saw that there was a surge in business equipment spending on info and processing equipment, as well as a surge in intellectual property products. That's R and D, that's software investment, and that is all tied to AI. And those were the major factors that were driving business investment and in turn GDP activity.

[Alex Osola]

Are there risks to the economy to have so much spending concentrated in one area?

[Greg Dacko]

It is a risk, and I have spoken in the past about the three fragile A pillars of growth, affluent consumers, AI investment, and asset price appreciation. When you have three narrow pillars of growth, it is encouraging when you have a virtuous cycle. But if there is a shock to one of these pillars, it will expose underlying fragilities in terms of economic momentum. Outside of AI, we're seeing more hesitation when it comes to investing, when it comes to hiring, and that is curbing the underlying potential for growth in terms of private sector activity.

[Alex Osola]

That was Greg Dacko, chief economist at EY Parthenon. Thanks, Greg.

[Greg Dacko]

Thank you.

[Alex Osola]

With the latest GDP numbers comes a sort of scary sounding milestone. The US national debt now exceeds 100% of gross domestic product. The government is spending $1.33 for every dollar it collects in revenue. It's not the first time the debt's topped gdp, and that number might bounce around a bit. There also isn't some special level where debt goes from problematic to catastrophic. But. But it is a symbol of the fiscal stresses on the US that have been building for decades. Investing columnist Spencer Jacobs says the debt is already weighing on the government's budget.

[Spencer Jacobs]

It gives the government less room for maneuver. I mean, just think if there's a pandemic or a recession. You already have a large deficit, you already have a lot of borrowings. You can't just necessarily write a blank check and it squeezes the actual spending power of the government. You know, as more and more money is dedicated to just to servicing the debt, there's less money to spend on actual things the government does.

[Alex Osola]

But Spencer says politicians keep spending the

[Spencer Jacobs]

budget deficit as a share of GDP today is at a level that you typically only see during deep recessions, when the government is trying to sort of pump up the economy and get us out, not in the middle of a boom like we're having now.

[Alex Osola]

In markets, the Dow led today's gains, closing up 1.6%. And the S and P and Nasdaq closed out one of their best months in years. The Nasdaq ended April with a gain of more than 15%, the biggest since early 2020. It was also the S&P's best month since 2020. It had a 10% gain. Several big American companies said AI spending is benefiting their businesses like Alphabet, Qualcomm and even Caterpillar. Data centers need the power generators Caterpillar makes. Not all tech stocks climbed, though. Meta and Microsoft slid on concerns about the cost of that AI buildout. And in other earnings, Apple reported sales and gross profit margins for its most recent quarter that exceeded Wall Street's expectations. IPhone's revenue rose more than 20% to nearly $57 billion. For more on the earnings, visit WSJ.com and Eli Lilly has raised its forecast for the year after a strong quarter. Booming sales of its weight loss drugs fueled strong revenue and profit growth in the first three months of the year. Sales of Mounjaro more than doubled, while zepbound sales rose 79%. Lilly is dominating in the anti obesity drug market and it's seeking to grow its share with its new weight loss pill. Its stock closed up about 10% today. Heads up that we dropped a special bonus episode earlier today. In the latest what's News in earnings, we look at what the rising cost of jet fuel has meant for the airline industry and for travelers like me who recently shelled out $400 a ticket for a round trip flight from New York to Atlanta. Ouch. Anyway, that's in your what's News feed now. Coming up, another insurer leaves the Affordable Care Marketplace and a big development in a hotly contested Senate race in Maine. That's after the break.

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[Alex Osola]

Turning to Washington, the House has approved a long delayed measure to fund most of the Department of Homeland Security. It funds the Coast Guard, FEMA and tsa, and the bill now goes to President Trump for his signature. You may have noticed that absent from that list of agencies is ice. Republicans are going to try to get legislation funding ICE and Border Patrol. Separately, President Trump is withdrawing his nomination of doctor and health food advocate Casey Means to serve as U.S. surgeon General. She didn't have enough support in the Senate to get confirmed. The president said today that he would instead nominate Nicole Safire for the role. She's the director of breast imaging at Memorial Sloan Kettering Cancer Center, Monmouth, and a Fox News contributor. And turning to Maine, which is crucial to Democratic hopes of retaking the Senate, Janet Mills, the state's Democratic governor, today dropped out of the Senate race. She said she didn't have the financial resources to keep going. Her exit all but secures the Democratic nomination for progressive Graham Platner, an oyster farmer and Marine veteran. He'll face off against Republican Senator Susan Collins, who has held the seat since 1997. The business of Affordable Care act health insurance has been hit hard by the loss of some federal subsidies. Plans have gotten more expensive and people are dropping them. And today CIGNA says it's not going to offer those plans anymore starting next year. That's after Aetna dropped out of the market at the start of this year. Cigna's not a very big player in the ACA market, with about 369,000 people enrolled in its plans. Ana Wilde Matthews, who covers health insurance for the Journal, says Cigna's exit is a sign of trouble in the broader ACA business.

[Ana Wilde Matthews]

Since the start of the year, a lot of people have just not paid and have been dropping out. Actuaries and insurers are projecting that overall enrollment could drop by maybe a quarter this year versus what it was last year, which was around 24 million. So what it really shows is just turmoil, a shrinking market and maybe an unstable market for the moment, Ana says

[Alex Osola]

ACA premiums are expected to keep climbing.

[Ana Wilde Matthews]

Insurers are right now actually making their filings with state regulators for their rates for 2027, and it does seem they're going to ask for significant premium increases in a number of markets. That said, very few people in the Affordable Care act marketplace actually pay the full premium. Most people still do get a subsidy and so premiums go up, but they do not bear the full brunt of that.

[Alex Osola]

In other health care related news, the Justice Department is launching a new health care fraud strike force. The unit will focus on Medicare and Medicaid fraud. On the west coast, criminals targeting health programs have followed the growing number of people retiring out west, and they're costing taxpayers billions of dollars. And finally, and David, I'm going to

[Greg Dacko]

ask you to take the down elevator. You're fired.

[Alex Osola]

Could the Apprentice be coming back? The Journal has learned that Amazon is discussing a potential reboot of the reality TV show that made Donald Trump a household name. Amazon executives have talked about casting Donald Trump Jr. President Trump's oldest son, as the host of a new version of the show. An Amazon spokesman said there's been preliminary internal discussions about what's next for the Apprentice as a brand, but that the show isn't in active development. Spokespeople for the White House and the Trump family didn't respond to requests for comment. And that's what's news for this Thursday afternoon. Today's show is produced by Anthony Bansy with supervising producer Tali Arbel. I'm Alex Osola for the Wall Street Journal. We'll be back with a new show tomorrow morning. Thanks for listening.

[Ana Wilde Matthews]

Foreign.

[Miriam Gottfried]

Hey, this is Telus Demos and I'm Miriam Gottfried.

[Alex Osola]

We're reporters at the Wall Street Journal and The hosts of WSJ's take on the Week. It's a weekly show that gives listeners a leg up in the world of markets and investing.

[Miriam Gottfried]

From the Fed's moves to market bubbles, we dive into the biggest deals, key players and business news ahead. If you're looking for more news and tools that you can use to help navigate the markets, consider becoming a subscriber to the Wall street journal.

[Alex Osola]

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