The top economist at the trillion-dollar firm Allianz says the US economy is now highly dependent on the burgeoning AI industry.
In a new CNBC interview, Allianz Chief Economic Advisor Mohamed El-Erian says America’s current outperformance is being powered by AI-driven productivity gains, not broad structural strength.
He also calls the AI boom a “rational bubble.”
“There is no doubt that we are in an AI-driven economy. And for good reason. The promise of AI in terms of productivity gains is huge. So if we didn’t have AI, we wouldn’t look as good as we do now, and we wouldn’t be outperforming the rest of the world, but we do have AI.”
He says the ongoing surge in AI investment is both inevitable and selective, noting that intense competition will leave only a handful of long-term winners.
“What I would stress is this is a rational bubble, that a lot of money is being thrown at different AI actors at the micro level because the promise is so huge. That is a good thing. That’s what distinguishes us from the rest of the world, because different AI companies are competing and excelling.
However, at the end of the day, they’re going to be just a few winners, a handful of winners. And therefore, some of the investment will result in tears. But overall, for the economy, this is good news. It promises us significant productivity gains.”
Turning to gold, El-Erian says the precious metal’s rise reflects global investors’ desire to hold US assets while hedging against the dollar itself.
“So the rest of the world says, ‘I want to go long US enterprise, but I want to short the dollar.’ How do they diversify away from the dollar? They slowly buy gold.”
He adds that both central banks and institutional investors are increasing gold exposure, while speculators amplify short-term volatility.
“You have central banks, slowly moving from the dollar into gold, slowly. And you have institutional investors increasing the allocation to gold in their model portfolio. On top of that, you have speculators. So that means it’s not going to be straight up, but it will continue to go up, in my opinion.”
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