The AI investment boom is set to push global growth further than initially modeled, Bank of America said in a midyear report published late last week.

Spurred by a mix of tailwinds, BofA strategists now see the global economy growing by 3.2% in 2026 and by 3.5% in 2027, with AI in the driver's seat. The economists had previously estimated growth at 3.1% and 3.4% in 2026 and 2027, respectively.

"More than the peace deal, the main drivers of the upward revision to global growth this year are the AI-driven export cycle in Asia and the AI investment boom in the US, while lower oil prices boost growth mildly in developed markets in 2027," global economists Claudio Irigoyen and Antonio Gabriel wrote to clients on Monday.

Through 2025 and into 2026, AI has increasingly dominated US final domestic demand growth, taking over from the traditional leader β€” consumer spending β€” per data published by the bank. That trend mean-reversed in the third and fourth quarters of 2025, but in the first quarter of 2026, AI was far and away the leader.

Where AI has boomed, consumer spending has been hamstrung by war-driven surging energy prices through the front half of the year and by steadily rising US inflation that won't seem to go away β€” and which looks increasingly likely to push the US Federal Reserve to raise rates.

The picture for the US consumer isn't all bad, BofA noted: "Before the deal, we were impressed with the resilience of the consumer to the gas shock. But we were concerned about how long it could last, since tax-related fiscal stimulus, which acted as an offset, was plateauing and real income was declining."

Now, the bank sees "robust growth" for consumer spending through the second half of the year.

But its role in leading the economy β€” see 2024 and 2025 in the chart above β€” is losing ground to the AI investment cycle that has seen megacap tech leaders pouring hundreds of billions of dollars into a race with no end in sight.

It's also important to note: AI's driving force on the economy isn't restricted to the US. The boom in investment has provided a boon for the export economy in China, where many machinery parts are manufactured and shipped to global buyers, and to emerging-market economies.

For an example of the latter, look no further than South Korea, where the Kospi Composite index (^KS11) has raced upward by just shy of 100% since the start of the year. The index is heavily weighted toward the semiconductor trade, helmed by SK Hynix (000660.KS) and Samsung Electronics (005930.KS).

"Evidently, the AI investment boom is an engine of global growth at the moment, as showcased by booming exports in China and the rest of EM Asia," Irigoyen and Gabriel wrote to clients.

That said, Bank of America sees risks on the horizon, most pressing among them the increased likelihood of rate hikes by the Federal Reserve. BofA economists are predicting 75 basis points in rate hikes by the end of 2026.

"Despite our moderate upward revisions, many risks remain. In a context where loose financial conditions and AI have been driving stock markets and fueling K-shaped dynamics, and with Fed hikes on the horizon, the risk of a disorderly tightening of financial conditions may still be the Achilles' heel of the global economy," Irigoyen and Gabriel wrote.

They also noted, on energy markets, "While the temporary deal dissipates immediate risks from the Iran war, the risk of escalation remains, and not as much oil inventories would be there to buffer the shock."

For now, however, the global economy is the AI economy.

Jake Conley is a breaking news reporter covering US equities for Yahoo Finance. Follow him on X at @byjakeconley or email him at jake.conley@yahooinc.com.

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