Investment in artificial intelligence is now a main driver of the stock market and of spending across the US economy, according to economists and market analysts. Demand for AI chips, data centers, and cloud computing has lifted the shares of technology companies and rippled into construction, energy, and equipment makers. A new field called 'tokenomics' has emerged to measure the returns on AI spending. At the same time, Federal Reserve officials are watching whether AI-driven investment adds to inflation. The combination of record AI capital spending and a strong stock market has left some analysts asking how long the boom can last.
The US economy grew at an annual rate of 1.5% in the second quarter, slower than expected, as the Iran war and new tariffs weighed on activity. Consumer spending surged 3.2%, helped by bigger tax refunds and higher gas prices, but business investment and exports softened. The Federal Reserve held interest rates steady for the fifth straight meeting, citing resurgent inflation linked to energy costs, and Wall Street closed down sharply after the decision. Mortgage rates climbed to nearly 6.55%, the highest in a year, adding pressure on home buyers. This report breaks down the growth report, the consumer picture, and what the Fed's decision means for households and markets.
The Federal Reserve left interest rates unchanged for the fifth meeting in a row, but the decision masked growing divisions among policymakers. Several officials dissented and warned that inflation could become entrenched unless the Fed tightens policy soon. The hold came as markets churned over higher oil prices and heavy spending on artificial intelligence. Bond investors also showed rising anxiety about inflation, frustrated by the Fed's lack of guidance on future moves. The internal split puts pressure on Fed chair Kevin Warsh, who faced the strongest dissent of his tenure. The next inflation and jobs reports will now carry extra weight.
Apple is set to lose nearly $500 billion in market value after the company issued a weaker-than-expected sales forecast. Investors reacted sharply to the outlook, which pointed to slowing demand for iPhones and softness in key markets. The drop would mark one of the largest single-day declines in the company's history. Analysts said the forecast reflects a broader slowdown in consumer electronics spending and intensifying competition. Apple shares fell in early trading as traders rushed to price in the new guidance. The selloff also dragged down other technology stocks, renewing questions about the health of the sector.
The Federal Reserve held interest rates steady at its July meeting, citing elevated inflation, even as US economic growth slowed in the second quarter of 2026. New tariffs and higher oil prices created a supply shock that dragged down GDP, while domestic demand stayed robust. Internal divisions emerged at the meeting, with some officials dissenting in favor of a rate increase. Bond investors remain worried about the lack of guidance from the central bank, and long-term Treasury yields have moved higher. Markets now expect the Fed to hold rates through the fall and begin cutting only if inflation falls back toward its 2 percent target.
The Federal Reserve voted 9-3 to keep interest rates unchanged at 3.5% to 3.75% on Wednesday, marking the fifth consecutive hold as inflation remains elevated. Fed Chair Kevin Warsh cited heightened fuel prices driven by the Iran war as a key factor. Three dissenting members voted for a 25-basis-point rate hike. President Trump has been pressuring the Fed to cut rates, but policymakers say they need to see sustained progress on inflation before making any moves.
Oil prices surged past $100 a barrel as the US-Iran conflict disrupted shipping in the Strait of Hormuz. President Trump simultaneously imposed a new round of tariffs on allies and rivals, straining global trade. The FTSE 100 hit a record high despite the sell-off in tech stocks, while Asian markets tumbled on fears of a prolonged trade war combined with soaring energy costs.
Brent crude futures fell more than 5% to $91 a barrel after the US and Iran paused tit-for-tat strikes over the weekend, raising hopes of a diplomatic resolution that could restore shipping through the Strait of Hormuz.
President Trump announced a 301 investigation and threatened steep tariffs against the European Union after it fined Google €890 million for violating the Digital Markets Act.