Has AI Made the US Economy Inelastic

The US economy is exhibiting surprising resilience due to 'inelastic' demand, particularly in massive AI infrastructure spending and household consumption. This suggests a higher-growth, higher-margin environment for US equities compared to the rest of the world.

Key Takeaways

• 1.AI investment is proving highly price-inelastic, with hyperscaler capex forecasts for 2026 revised upward to $805bn despite rising costs of components like copper and energy.
• 2.The US economy is showing significant resilience with growth forecasts for 2026 raised to +2.3% and S&P 500 earnings growth revised to +23%.
• 3.Inelasticity is visible in the consumer sector as well, where higher energy prices and airfares (+20.7% Y/Y) have not yet dampened demand.

Table of Contents

• Mid-Year Outlooks
• Shift in Energy
• Strength of Activity Despite Geopolitics
• AI Infrastructure Buildout
• Inelasticity and Demand
• Inelasticity in Household Demand
• Implications for Bonds and Central Banks

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