The Architecture of the Next Economic Expansion

• AI is entering its internet-1990s moment.

• Compute, memory, and power demand are exploding.

• The earnings flywheel for compounding growth is already forming.

The conversation around AI is changing fast. And the investors who move early will own the next decade of growth…

Smart investing is about positioning ahead of the economic conversation, not reacting to where it sits today. To capture the defining growth of the next generation, the focus has to shift toward the infrastructure companies building tomorrow’s economy in real time.

We’ve seen this movie before. In the early 1990s, as the internet began its climb, U.S. GDP hovered near $6 trillion. As businesses integrated the web, a massive efficiency wave took hold. By 2020, with internet adoption fully mature, real GDP had expanded to more than $21 trillion. A three‑and‑a‑half‑fold increase, driven not by speculation, but by a structural rewiring of how the economy produced output…

Today, Artificial Intelligence is setting up an almost identical macro backdrop. We are still in the absolute infancy of this technology cycle. Enterprise deployment of AI agents is just beginning. As this architectural shift accelerates, it will ignite a powerful, sustained expansion in productivity and earnings. That is the foundation for a steady, long-term rally in the S&P 500 Index.

But don’t take my word for it, let’s look at what the data’s telling us…

The Structural Shift to Agentic AI

The AI narrative has moved far beyond content generation. The frontier now is autonomous action — digital agents that plan, reason, and execute. This shift is redefining global computing architecture.

• Fully Accretive Growth: NVIDIA CEO Jensen Huang notes that agentic AI is additive, not cannibalistic. Agents act as a new “brain” layer that requires a fresh digital harness. Instead of replacing existing systems, they expand the total addressable market by transforming software into a scalable service layer.

• Massive Computational Scaling: Dell Technologies CEO Michael Dell recently stated that agentic frameworks demand exponentially more compute. Digital agents constantly query tools, access long term memory, and run workflows in real time, a step change from legacy models.

• The New Platform Race: Investors like Gavin Baker emphasize that this transition is driving a historic surge in infrastructure demand. Supporting autonomous digital workflows requires a national build out of compute, memory, networking, and power capacity.

Supply Constraints and Economic Booms

This sudden demand for intelligence is colliding with the physical world. Semiconductor and hardware supply chains are expanding as fast as they can, yet they remain heavily constrained. Advanced chips, specialized memory, and power infrastructure are all in structural shortage.

But this is exactly what the late 1990s looked like. As technology adoption accelerated, the economy experienced a rare combination: faster real GDP growth paired with falling inflation. Technology is inherently deflationary because it allows businesses to produce more output with fewer friction points. AI is poised to amplify that dynamic.

Productivity Over Displacement

A common anxiety surrounding this technology is the fear of widespread job displacement. However, technology leaders view this transformation through a very different lens.

Amazon Web Services CEO Matt Garman recently pushed back directly against warnings of an AI job apocalypse. In an interview with The Wall Street Journal, he said that these technological shifts will drive substantial internal efficiency and labor productivity rather than triggering mass layoffs.

Historically, when technology automates a repetitive task, it does not eliminate the human worker. Instead, it elevates them. By delegating data processing, testing, and routine administrative workflows to digital agents, employees can focus on higher-value problem solving, creative strategy, and product innovation. The end result is an economic expansion driven by human-machine collaboration, allowing organizations to achieve scale without standard linear head-count expansion.

The Broader Economic Ripple Effect

The ultimate beneficiaries of this paradigm shift extend far beyond the immediate technology sector. Non-tech companies across manufacturing, healthcare, finance, and logistics will see a profound impact on their bottom lines. Just look at the earnings growth Wall Street analysts anticipate as this story plays out. According to financial data provider FactSet, S&P 500 member companies’ earnings are expected to rise to $384 by the end of 2027 compared to $271 for 2025…

As these traditional enterprises increasingly employ the latest, greatest agentic technology, they will eliminate structural operational friction. This widespread adoption will drive substantial profit margin growth across the broader economy.

Crucially, as these non-tech businesses realize higher returns on investment from their tech deployments, they will reinvest those gains. This dynamic will fuel rising demand for the technology "picks and shovels" that enable the change in the first place. It will range from cutting-edge semiconductors to specialized data center infrastructure.

Bottom line: this symbiotic relationship between tech enablers and corporate adopters creates a powerful economic feedback loop, underpinning a steady, long-term rally for the S&P 500 Index.

Five Stories Moving the Market:

U.S. President Donald Trump said ​ the United States may need to strike Iran again and that he had been an hour away from ordering an attack before postponing it – Reuters. (Why you should care – Trump said a new U.S. strike would take place in the coming days if Iran didn’t agree to a deal)

U.S. Vice President JD Vance said he believes it has made "a lot of progress" in the negotiations with Iran and insisted that "this is not a forever war"; Vance reiterated that Iran cannot have a nuclear weapon – BBC. (Why you should care – Vance called Iran’s leadership fractured, making it difficult to negotiate) 

Iran’s position in talks with the U.S. to end the war hasn’t changed much from earlier iterations that failed to yield progress toward a deal, according to regional mediators and U.S. officials familiar with the terms; the statements raise questions about whether an offramp to the conflict can be found – WSJ. (Why you should care – the U.S. is unlikely to go for a deal that doesn’t involve Iran giving up nuclear weapon ambitions)

NATO is discussing the possibility of helping ships pass through the blocked Strait of Hormuz if the waterway isn’t reopened by early July, according to a senior official; the idea has support from several members of the North Atlantic Treaty Organization, but doesn’t yet have the necessary unanimous support – Bloomberg. (Why you should care – up until now, NATO members had said they would wait until after the conflict ends to take action)

Federal Reserve Bank of Philadelphia ‌President Anna Paulson said the current level of interest rates is appropriate for the moment, putting downward pressure on inflation at a ​time when price pressures remain elevated; she added it was "healthy" that investors had begun considering scenarios where rates might need to rise – Reuters. (Why you should care – Paulson said longer-term inflation expectations are still running around normal levels)

Economic Calendar:

Earnings: ADI, INTU, LOW, NVDA, TGT, TJX, VFC, WSM

China – PBoC Loan Prime Rate for May

U.K. – CPI, PPI for April (2 a.m.)

U.S. - MBA Mortgage Applications (7 a.m.)

Fed’s Barr (Board Member) Speaks (9:15 a.m.)

U.S. - Energy Information Administration Crude Oil Inventory Data (10:30 a.m.)

Treasury Auctions $16 Billion in 20-Year Bonds (1 p.m.)

Fed Meeting Minutes (2 p.m.)