David Woo, CEO and founder of macroeconomic research firm David Woo Unbound, has explained the key role that artificial intelligence (AI) has played in preventing the U.S. from slipping into a recession.

Notably, throughout 2025, concerns have been raised about a possible recession in the United States due to the impact of tariffs and the potential bursting of an AI bubble. 

According to Woo, while there is considerable debate about the current state of the economy, the rapid expansion of AI technologies, particularly through capital expenditures (capex) in the tech sector, has been a major stabilizing force, he said during an interview with David Lin published on November 16.

He noted that investments in information technology and AI-driven infrastructure have contributed significantly to the country’s GDP, effectively cushioning it from economic downturns. Without these AI-driven investments, Woo believes the U.S. would likely have already entered a recession in 2025.

Woo highlighted that the $14 trillion surge in AI-related wealth since April has generated a significant wealth effect, particularly benefiting higher-income individuals. 

‘If it hadn’t been for AI the U.S. economy would have already gone into a recession because of the tariff. Why it didn’t is because of a combination of the capex spending which has contributed importantly to GDP growth but also more important is of course the wealth that was created since April alone,” Woo said. 

This newfound wealth has driven increased consumer spending, especially among the wealthy, helping to support the economy.

Effect of Trump’s tariffs 

The researcher also observed that while President Donald Trump’s trade tariffs were intended to strengthen U.S. manufacturing, they inadvertently placed economic pressure on the country. 

However, he argued that the explosion of the AI market effectively offset these challenges, propelling the economy forward. According to Woo, Trump was fortunate in this regard, as the AI boom mitigated the potential damage from his tariff policies.

Looking ahead, he cautioned that the possibility of a significant correction in the tech sector, potentially a 20% drop in the NASDAQ, remains a concern. 

If such a downturn were to occur, Woo predicted it could push the U.S. economy into a recession. He suggested that the outcome of this unfolding situation will play a crucial role in shaping the economic landscape through 2026 and beyond.

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