Trump's AI Race Leaves Markets and Public Finances Exposed

President Trump rejected calls to negotiate guardrails for advanced AI models with China’s leader, Xi Jinping, as he pressed the U.S. race for global dominance in superintelligence. That race is drawing chips and energy into data centers, raising costs elsewhere and tying markets more tightly to a technology whose returns remain uncertain.

Who Gets to Set the Terms

Weeks before Americans were due to vote in the 2026 midterm elections, a whistleblower’s viral warning that AI could pose an existential threat caught the White House off guard. Trump dismissed the concerns and emphasized competition. Privately, he worried public alarm could jolt markets heavily concentrated in AI-related stocks. Polling showed widespread bipartisan opposition to the data-center construction boom, a Trump-backed effort that, the article says, has diverted chips and energy from other economic sectors and driven up costs.

The exposure already shows in the numbers. Independent analyses cited in the report found that spending on data-center infrastructure in the winter and spring accounted for nearly all U.S. economic growth. Without that spending, growth would have slowed to a fraction of a percentage point, leaving the economy nearly stagnant and flirting with recession. Companies dependent on AI make up about 70% of the Nasdaq 100’s index weight, including semiconductor manufacturers, Big Tech companies, cloud platforms and software providers.

Economists warn the federal government may have fewer tools to respond if the boom breaks. Kenneth Rogoff, an economist at Harvard, said, “Trump could easily run into a financial crisis before his term is up. It is entirely plausible to have a 30% — or more — drop in the stock market, and in the context of an economy so dependent on AI, this in turn could easily lead to a recession and widespread financial distress.”

Rogoff also cited strained government finances and national debt on what he called a “patently unsustainable trajectory.” He said no one could guarantee long-term government borrowing rates would fall sharply, leaving fewer options to bail out the financial sector or fight recession than during the global financial crisis. A rescue plan remains hypothetical. The limits on a public response aren’t.

The Bill for the Boom

Tariffs have raised the cost of imported chips, servers, networking equipment, metals and electrical components. Visa restrictions have made it harder for industry leaders to secure top international talent. Federal deficits have pushed up long-term bond interest rates, adding pressure on AI companies already carrying debt. Servaas Storm, an economist at Delft University of Technology who follows the AI sector, said energy, chip and mineral costs were increasing business expenses.

The promised productivity gains haven’t arrived evenly. Microsoft, Meta and Walmart were scaling back AI use because employees spent too much time correcting errors, cleaning up poor-quality output and addressing security lapses. Torsten Slok, chief economist at Apollo Global Management Inc., said AI had provided “zero payoff” to corporate America outside technology despite substantial investment. “Revenue per worker is rising for the Mag 7 but is flat for the S&P 493,” Slok wrote in a note published Saturday. Profit margins showed the same pattern; so far, AI hasn’t boosted productivity growth.

Financial warnings keep piling up. Ray Dalio, founder of Bridgewater Associates, said AI stocks had become detached from financial fundamentals. Ken Griffin, described as the world’s richest hedge fund owner, said AI was “almost certainly” fueling a market bubble that could be nearing a burst. Storm said, “There is indeed an AI bubble in the stock market and in data center construction, which could pop rather soon, as rising debt loads and elevated interest rates could prove too much to sustain it.” He added that the moment wasn’t imminent, but was approaching and would very likely happen before the end of Trump’s presidency.

A New York Times guest essay compared the AI boom with the housing bubble. It alleged that companies were hiding substantial debt off public balance sheets, while firms responsible for protecting pensions and insurance bought complex products backed by assets of uncertain value. The essay also described companies buying and selling large amounts of a popular product among themselves, inflating demand, and accountants and credit-rating firms financially beholden to debtors using weak justifications to declare matters sound. It argued that a crash could destroy more wealth than the 2008 financial crisis because U.S. funds held more money in AI-heavy stocks than in homes.

Automation’s Owners and Customers

The same investment logic appears at Wonder, a food startup serial entrepreneur Marc Lore created in 2018. The company has raised $3.3 billion from investors including DoorDash, Alphabet’s venture arm and Gwyneth Paltrow, and its Series D round earlier in 2026 gave it a $9 billion pre-money valuation. Wonder uses automation for some kitchen tasks and plans to automate sauces and beverages; Lore said the company aims to make food preparation and delivery fully autonomous by 2040.

Wonder opened 170 storefronts in Virginia through Massachusetts over the three years before the article and planned to enter Texas in 2027, targeting at least 100 locations there by the end of that year. Its commissary kitchens prepare food for employees to unseal, cook and finish at storefronts. The company says all-electric locations without gas or ventilation can reduce renovations and red tape. Lore has spent more than $1 billion on acquisitions, including Grubhub, delivery and logistics provider Relay, meal-kit company Blue Apron and New York restaurant concepts.

The planned Wonder Create service would let influencers, entrepreneurs and brands pay $10 a month to develop a restaurant concept at a Wonder location and earn a share of orders’ revenue. AI would help create names, logos, prices and recipes. Wonder said the service would make restaurant ownership possible without the capital, overhead or kitchen-operation oversight. Customers, though, still judge the food and the price. Amir Ings, a 27-year-old living in Philadelphia, said in a TikTok review of three Wonder tacos in late 2025: “It’s OK, but it’s just average. My expectations were already in the gutter — it’s not as bad as I thought it was going to be, but it’s still not great. And I paid like $16 for this, but it should have been no more than $8.”

The wider economic mood offers little confidence. In a Fox News poll, 77% rated the economy fair or poor. A separate CNBC survey found 34% approved of Trump’s handling of the economy, while 35% of Republicans disapproved, a record high within his own party. Kenneth Rogoff offered a final warning: “So the options for bailing out the financial sector, or fighting recession, could be much more constrained than during the global financial crisis.”