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Investor and author Ruchir Sharma believes the decade-long era of “American exceptionalism” is peaking, warning that the U.S. economy has become dangerously reliant on a single technological narrative.
Speaking on a recent episode of the Bankless podcast, the Breakout Capital CIO argued that the United States has effectively become “one big bet on AI,” a concentration of risk that masks deep structural vulnerabilities.
Sharma offered a stark quantification of this dependency: approximately 40% of U.S. economic growth this year is derived directly from capital expenditure on building AI infrastructure.
Furthermore, he noted that nearly 80% of the U.S. stock market's recent gains are driven by AI-related plays. Without this “maniacal focus” and the resulting wealth effect, Sharma suggests the underlying economy might be closer to stall speed.
Sharma explained that America’s AI enthusiasm is papering over structural cracks, including a fiscal deficit breaching 6% of GDP and a national debt exceeding 100% of GDP.
He argues that global investors are currently giving the U.S. a “free pass” on these deficits—and on potential headwinds from tariffs or immigration restrictions—because of an implicit bet that an AI-driven productivity boom will eventually neutralize the debt.
When asked if markets are in a bubble, Sharma answered affirmatively, defining the current climate as “a good story that’s gone too far.”
While noting that bubbles rarely burst on their own, he warned that a resurgence of inflation forcing the Federal Reserve to tighten monetary policy could serve as the catalyst to end the euphoria.
See Also: Magnificent Seven Will Become Low-Profit Tech Utilities, Analyst Warns
“If the AI boom was not happening, the economy would be weaker,” Sharma noted.
To hedge against this concentration risk, he advocates looking abroad. He pointed out that the “gap of outperformance” between the U.S. and international markets is finally closing, advising investors to diversify into undervalued assets in China, India, and recovering European markets like Greece.
The futures of the S&P 500, Nasdaq 100, and Dow Jones indices were trading higher on Monday, after a positive close on Friday.
The SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust ETF (NASDAQ:QQQ), which track the S&P 500 index and Nasdaq 100 index, respectively, closed higher on Friday. The SPY was up 1.00% at $659.03, while the QQQ advanced 0.75% to $590.07, according to Benzinga Pro data.
Here are some U.S.-listed AI-linked exchange-traded funds that investors could consider.
| ETF Name | YTD Performance | One Year Performance |
| iShares US Technology ETF (NYSE:IYW) | 19.04% | 19.40% |
| Fidelity MSCI Information Technology Index ETF (NYSE:FTEC) | 15.87% | 15.91% |
| First Trust Dow Jones Internet Index Fund (NYSE:FDN) | 5.65% | 6.42% |
| iShares Expanded Tech Sector ETF (NYSE:IGM) | 20.34% | 21.60% |
| iShares Global Tech ETF (NYSE:IXN) | 18.57% | 19.86% |
| Defiance Quantum ETF (NASDAQ:QTUM) | 23.09% | 45.85% |
| Roundhill Magnificent Seven ETF (BATS:MAGS) | 17.17% | 24.97% |
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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