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Economic Trends · Feb 17th, 2026
What this video’s about
In this episode of The Market Share, Erik Clapsaddle, Senior Fixed Income Portfolio Manager at 1st Source Bank, is joined by fellow Portfolio Manager, Matt Noll to discuss a growing divide in today’s economy.
Consumer data is softening. Labor markets are cooling. Yet GDP remains strong and fourth-quarter output is expected to improve. What explains the disconnect? Erik and Matt walk through the forces driving this unusual economic backdrop and why artificial intelligence may be the key factor.
A slowing consumer, but no recession
For nearly two years, markets have watched signs of labor market softening. Job growth continues, but the pace has slowed meaningfully. Matt notes that when year-over-year job growth drops below 1 percent, it often signals recessionary conditions. At one point, it dipped as low as 0.4 percent before rebounding modestly.
Retail sales are also below expectations, reinforcing the idea that the consumer is pulling back.
Under normal circumstances, weaker consumer spending would drag down GDP. After all, consumer activity typically does most of the heavy lifting in economic growth. This time, however, something different is happening.
AI infrastructure is reshaping GDP
What has stepped in to offset consumer weakness? Business investment.
Matt explains that spending tied to artificial intelligence infrastructure, especially data centers, has become a major contributor to economic growth. In fact, data center investment has contributed almost as much to GDP growth as consumer spending over the past year. That level of impact from investment spending is highly unusual for the technology sector.
Rather than a consumer-led expansion, the economy is now investment-led. Growth has not disappeared. It has shifted.
The scale of Tech spending
The magnitude of this investment wave is significant. The five largest hyperscalers—Microsoft, Meta, Google, Amazon, and Oracle—are projected to spend more than $650 billion this year building out AI infrastructure.
Looking further ahead, that number could reach an estimated $2.5 trillion through 2029.
This is not just software development anymore, but includes physical assets such as steel, concrete, power contracts, semiconductor chips, and long-lived computing facilities. AI searches require far more computing power than traditional searches, driving demand for more data centers and more energy capacity.
These investments ripple through the economy, supporting construction, manufacturing, utilities, and financial markets.
The role of debt financing
As capital expenditures rise, companies are turning more frequently to debt markets to fund expansion. Matt notes that roughly 40 percent of hyperscaler spending is now expected to be financed through debt rather than solely from operating cash flow.
Erik references Google’s recent issuance of 100-year bonds in British pounds at just over 6 percent, along with strong investor demand.
When companies tap debt markets at this scale, the impact spreads across the financial system. It increases infrastructure lending and boosts overall economic activity. At the same time, markets can grow uneasy if borrowing outpaces proven returns.
As Matt explains, when debt funds investments that are still being evaluated for long-term payoff, it can make investors more cautious.
Conclusion
Today’s economy presents a unique mix of slowing consumer data and strong investment-driven growth. Artificial intelligence infrastructure spending has become one of the most important forces shaping GDP, financial markets, and capital flows.
The key question is not whether growth exists, but where it is coming from—and how sustainable that shift may be.
Stay informed with The Market Share for clear insights into the trends driving today’s economy and what they could mean for your financial strategy.
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