US GDP grew by 3.4 percent in third quarter amid AI investment boom

U.S. economic growth increased in the third quarter, as the surge in artificial intelligence investment continued and consumers kept spending despite persistent inflation .

The country’s gross domestic product (GDP) increased at an annual rate of 3.4 percent from July through September, preliminary data from the Bureau of Economic Analysis (BEA) showed Thursday. The BEA will release updated GDP data during the weeks of Thanksgiving and Christmas.

Real GDP rose by 2.2 percent in the second quarter, after increasing by 2.5 percent in the first quarter. Last quarter marked the strongest economic growth since the third quarter of 2025, when real GDP increased by 3.9 percent.

Consumer spending increased by 3.8 percent last quarter, the same percentage it grew by in the second quarter. That was despite inflation straining Americans’ wallets , as the BEA’s personal consumption expenditures (PCE) price index measured prices as up 3.6 percent year over year in September.

Nonresidential business investment, meanwhile, increased by 12.7 percent from July through September, the highest quarterly jump dating to the start of 2024.

Major tech companies have sought to keep up in the AI race, constructing data centers across the country. Capital spending by “hyperscalers,” or large-scale computing companies, is on track to approach $800 billion this year, according to an analysis by JP Morgan Asset Management.

“The U.S. economy is on steroids right now. Growth came in stronger than expected and it’s largely due to the massive AI business investment surge,” Heather Long, the chief economist at Navy Federal Credit Union, wrote to The Hill.

But Long noted that wealthy Americans are “driving the uptick in spending” and called inflation the “Achilles heel” of the economy.

Annual inflation has remained above the Federal Reserve’s 2 percent target for 5 1/2 years, and rose from 3.4 percent in August to 3.6 percent last month, per the PCE.

Energy prices remain higher amid the eight-month Iran war , as gas and diesel cost more than $4 and $6 per gallon, respectively. The price of gas and other energy products experienced its highest monthly jump since March last month, increasing by 9.2 percent from August.

“While consumption is clearly strong — the best since late 2024 — the September data are yet another reminder that many Americans are spending more money than they bring in,” Long wrote. “And inflation-adjusted spending was flat in September.”

She added, “As people are spending more on basic essentials, many middle- and lower-income households are having to scale back somewhere. For now, people are dipping into savings or buying on credit.”

Higher prices have dealt President Trump and the GOP a difficult hand , with midterm voting already underway.

They also spurred the Federal Reserve to raise interest rates by a quarter point last month. Central bank officials, though, held rates steady on Wednesday — with Fed Chair Kevin Warsh saying the pause will allow policymakers to accumulate more information before their next meeting in December.