The United States economy is showing signs of vulnerability, heavily dependent on the technology sector for growth. According to recent modeling by Oxford Economics, a slowdown in tech investment could push the U.S. to the brink of recession, with global economic impacts that extend beyond American borders. Tech has been the powerhouse fueling much of the U.S. growth in recent years. Artificial intelligence and other tech advances have not only sparked investor excitement but reshaped the way businesses operate and envision the future workforce. However, this rapid growth has also raised concerns reminiscent of the dot-com bubble of the late 1990s — a period marked by inflated valuations followed by a sharp market crash.
Adam Slater, lead economist at Oxford Economics, highlights that without the heavy investment in tech equipment and software, the U.S. gross domestic product (GDP) would have barely grown in the first half of 2025. With tech as the backbone, business investment narrowly grew; without it, investment would have declined. This exposes the economy to significant risks if the tech sector falters.
Oxford Economics presents two potential scenarios: In a U.S.-focused downturn, domestic GDP growth could shrink to 0.8% by 2026 — a level “flirting with recession.” This slowdown would not remain confined to the U.S., slowing global growth from an anticipated 2.5% to 2%. A more severe, globally synchronized tech dip could lower world GDP growth further to 1.7%, disproportionately impacting countries with close ties to the U.S. and the tech supply chain, such as Mexico, Canada, Vietnam, Taiwan, South Korea, and Malaysia, with GDP drops of 1.5% or more versus baseline projections.
Despite these warnings, Slater stresses that the risk, while far from negligible, is more contained than during the dot-com crash. Back then, tech stocks fell by about a third, whereas today’s modeling points to a potential tech stock price decline of around 25%. This is partly because current valuations are less stretched relative to their historical averages than in 2000. Nonetheless, the economic impact could still be severe given the increasing exposure of U.S. households to equity markets.
Today, direct and indirect stock holdings equal approximately 250% of U.S. disposable income, compared to 180% during the dot-com bubble. Moreover, about 60% of U.S. families own stocks, with wealthier households — responsible for 45% to 50% of consumer spending — holding a disproportionate share of market exposure. This raises the stakes for financial stability should tech valuations fall sharply.
Market watchers and economists are divided on how the tech sector will evolve but commonly recognize it as the current engine of growth. The enthusiasm around AI has propelled expectations to unprecedented levels, but caution from financial leaders like JPMorgan Chase CEO Jamie Dimon, who warned parts of the current investment cycle might be bubble-like, suggests markets could face turbulence.
The stakes extend beyond the U.S., as global economies intertwined with technology development and trade are vulnerable to shocks stemming from a potential tech downturn. While a repeat of the dot-com fallout is unlikely to be as severe, investors and policymakers should prepare for choppy economic waters ahead.
