The U.S. economy is growing surprisingly fast - and here's the surprising reason

By Jeffry Bartash

Business investment emerges from a 2-year slump as the artificial-intelligence boom spreads

Artificial intelligence and related technologies are driving stronger-than-expected growth in the U.S. economy.

The numbers: Rising business investment is the surprise star of the five-year-old U.S. economic expansion - and it doesn't look ready to slow down.

A key gauge of investment rose in December for the sixth month in a row, reflecting a frenzied effort by companies to adopt new technologies such as artificial intelligence as a means to improve productivity and profits.

So-called core orders for durable goods climbed 0.6% in December, capping off the biggest annual increase in business investment in three years.

The increase in 2025 in these orders - which omits transportation and defense - has helped power the ongoing economic expansion along with strong consumer spending.

Nor are businesses prepared to scale back in 2026. AI companies and their suppliers - chip makers such as Nvidia NVDA - are plowing hundreds of billions of dollars into the technology.

All this spending is filtering down to other companies and igniting a broader increase in investment. Investment rose in the final six months of 2025, matching the longest streak in three years.

For all of 2025, core investment rose almost 4%. These outlays had declined in both 2024 and 2023.

The big burst in investment has taken place despite high U.S. tariffs by the Trump administration, which many economists thought would dampen spending. The tariffs appeared to slow investment in the middle of 2025, but spending has since rebounded robustly.

Key details: The investment figures were included in the government's monthly report on durable goods. These are products meant to last a long time, such as cars, computers and tools.

Orders for durable goods fell 1.4 % in the month, but the decline was exaggerated by fewer Boeing (BA) contracts for passenger planes.

Aircraft orders are lumpy from month to month and the planes take a few years to build. So it's best to strip out planes and the auto sector to get a better sense of underlying business investment patterns.

Orders minus transportation rose almost 1% in December, marking the ninth increase in a row.

The durable-goods report for December was reported later than usual due to delays caused by the government shutdown last fall.

Big picture: Companies are convinced AI and other emerging technologies can reshape and improve how they do business: how they are organized, how many people they employ, how they produce goods and services.

All of that spending is primed to help the U.S. economy expand for a fifth straight year at an above-average growth rate. Fourth-quarter and full-year 2025 results for gross domestic product are due on Friday.

Looking ahead: "The bottom line is that after the AI boom sustained the business spending category of GDP in the first three quarters of the year, firms outside of the tech space began to re-engage late last year, setting the stage for a noticeable pickup in investment outlays in 2026," chief U.S. economist Stephen Stanley of Santander Capital Markets wrote in a note.

"This has been and continues to be my main justification for expecting an above-consensus economic performance in 2026."

Market reaction: The Dow Jones Industrial Average DJIA and S&P 500 SPX were set to rise in Tuesday trading.

-Jeffry Bartash

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02-18-26 0930ET