Why Bank of America warns Iran war could disrupt US economy’s 'two engines', AI boom and consumer spending?

US economy growth drivers at risk warning: A growing share of the US economy is now leaning on just two powerful forces: household spending and the boom in artificial intelligence investment. But Bank of America pointed out that a new geopolitical shock, the war involving Iran, could put both of those engines at risk, as per a report.

Bank of America Flags “Two Tailwinds, One Risk” Economic Structure

In a recent note, BofA economists described the current moment as a “two tailwinds, one risk” setup, as per a Business Insider report. Their base view is still optimistic: consumers continue to spend, and AI-related investment is expected to stay strong or even accelerate. But they warn that the conflict in the Middle East could disrupt this balance in ways that matter for growth.

AI Investment Becomes a Major Driver of US GDP Growth

On one side is artificial intelligence. Big technology firms, Amazon, Microsoft, Meta, Alphabet, and others, are committing hundreds of billions of dollars to build the infrastructure behind AI. Spending on data centers, chips, and computing systems has become a meaningful driver of US economic growth.

Big Tech Plans Hundreds of Billions in AI Infrastructure Spending

Estimates cited in the report suggest these companies could collectively spend up to $725 billion in capital expenditures in 2026, with some forecasts pushing that figure closer to $800 billion when including additional major players. Economists have even suggested this wave of investment could add more than 2% to GDP growth in 2026, and potentially more in 2027.

Early Data Shows AI Already Boosting US Economic Output

Recent data already reflects this impact. Information processing equipment investment alone contributed 0.83% to GDP growth in the first quarter of 2026, while software added another 0.51%. Analysts have noted that AI-related investment has become one of the standout contributors to growth in recent years, as per the Business Insider report.

AI Capex Forecasts Point to Strong Contribution to Future GDP

US president Donald Trump's former AI and crypto czar, David Sacks, predicts that AI capex will be a 2.5% tailwind to GDP growth in 2026 and more than 3% boost in 2027, and pointed out that, "The ROI on capex is likely to dwarf the capex itself, which is why investment continues to grow," adding, "Polls may show that AI is not popular, but economic growth is. At this point, stopping progress in AI would be equivalent to halting the U.S. economy," as quoted by Business Insider.

Household Consumption Continues to Support Economic Growth

The other major support for the economy is the American consumer.

Despite historically weak sentiment readings, spending has remained resilient. Bank of America reported that total spending recently grew at its fastest pace since early 2023. Even when stripping out the effect of higher gas prices, consumption continued to rise.

Healthcare and Services Drive US Consumer Spending Gains

Consumer activity contributed about 1.08% to first-quarter GDP growth, with services leading the way. Healthcare spending was a particularly strong contributor, though it also comes with persistent inflation pressures that limit how aggressively policymakers can respond.

Still, the bank describes consumer spending as solid, but gradually slowing, as per the Business Insider report.

Iran Conflict Raises Concerns Over Inflation and Energy Prices

The concern, according to BofA, is that the war involving Iran could strain both of these pillars at the same time.

Energy markets are already feeling pressure, with oil prices rising due to disruptions in supply. That creates a direct inflation risk for households, potentially reducing real purchasing power and weakening spending over time.

Oil Price Surges Create Inflation Risk for US Households

But the impact may not stop at fuel. Economists warn that higher energy costs can spill over into broader inflation, affecting groceries, clothing, medicine, and other essentials, as per the Business Insider report.

AI Boom Faces Potential Energy Supply Bottlenecks

Meanwhile, the AI investment boom could also face friction. The technology sector’s rapid expansion is increasingly tied to energy availability, and tighter supply conditions in global energy markets could create bottlenecks for data centers and computing infrastructure.

FAQs

Why is the US economy called “two tailwinds, one risk”?
Because growth is mainly driven by consumer spending and AI investment, while the Iran war is seen as a major downside risk.

How important is AI spending to the US economy?
AI-related investment is now a major GDP driver, contributing significantly to recent growth figures.