September 2026 has already proven to be an intense ride.
Global markets are navigating volatility, led mainly by geopolitical conflicts, abrupt asset price corrections, and AI adoption[i]. The fierce technology race between US and China is soon expected to narrow, with 6 out of 10 genAI patent applications based in China now. Interestingly, both countries are classified as most resilient geographies. Global investments in nuclear power, renewables and fossil fuels are continuing to go up.
However, beneath the surface an economic troubling reality is arising. The crowding-out effect is an economic term for increased spending and borrowing of money in one sector which leads to unintentionally weakening and displacement of other sectors.
For decades, it was government-driven. In the post-pandemic time (2022 – 2023), public debts relative to GDP reached unprecedented levels in both developed and developing economies. In the effort to manage inflation, central banks issued bonds, which heavily affected the availability of loans for small and medium-sized enterprises (SMEs). Earlier, in 2008, several European nations faced monstrous budget deficits and higher public debt. As the trust in government bonds was gone, the banks in these countries focused on purchasing sovereign high-yield bonds instead of lending to the real economy, which caused a prolonged economic stagnation.
Today this effect has evolved into something new. Now it is resource-driven with a hyper-dominant private High Tech sector.
The Physical Squeeze
Data center investment has rapidly become the largest driver of the global growth. While sectors like agriculture, mining, energy, and engineering are rushing to adopt AI, this is happening under severe friction. New data centers are triggering fierce justified pushback from the local communities. Worse yet, a comparable employment creation is missing. “Whether this source of growth will bring jobs is expected to be unlikely.”
Consider an example from beginning of August 2026: NVIDIA announced a blockbuster investment of $1.5bn into SB Energy, joining forces with Softbank Group and OpenAI to construct a massive 8 gigawatt (GW) technology campus in Ohio. To put that in perspective, that single campus represents 6% of the entire world`s data center output. Germany and UK alone are coming to the modest 5.5 GW and 2.0 GW respectively.
The energy footprint of these projects is staggering. In Ireland, data centers already swallow a mind-blowing ¼ of the country`s electricity – with a projection to hit 30% by 2032.
Furthermore, the mechanics of the NVIDIA deal signal deeper shift in corporate power; the tech giant is not just selling chips; it is providing up to $105bn in credit support and guarantees in exchange for a 20-year exclusive monopoly to manage the campus`s AI software. NVIDIA is going beyond traditional supply chain to build a closed infrastructure solely for its own investments.
The Great Economic Disconnect
The Organization for Economic Co-Operation and Development (OECD) recently noted that the massive AI investment and stable private consumption are successfully offsetting a weakening global labor market. A similar trend of compensation played out in China in Q2, where a surge in high-tech investment masked the lower domestic demand.
However, the alarms are ringing. The Bank of International Settlements (BIS) has expressed mounting concern that this AI hype might rest on shaky foundation. The BIS highlights severe financial vulnerabilities and a dangerous concentration of risk, warning that overinvestment could trigger a devastating economic shock if expected returns suddenly reverse.
Meanwhile, everyday households are feeling a completely different reality. Cost-of-living crisis is intensifying globally, with essential expenses like food, electricity and transport skyrocketing by up to 30%. As the inflation grip is at 4.7% – outpacing 2025 levels – household incomes are either stagnating or declining. In addition, geoeconomic trade fragmentation is contributing to the pain with rising tariffs.
Why Today`s Growth is a Major Red Flag
The global economy has arrived at a dangerous paradox. True resilience requires economic diversification and flexible supply chain networks – this is how major economists see it. Yet, current market dynamics are forcing extreme concentration and high-tech investment compensating for private consumption with standard of living declining.
It`s time to read numbers differently. Relying only on top-line GDP sum blindly masks the structural rot underneath. We must dissect the data to understand which foundational sectors are quietly being starved of resources and capital.
Offsetting an eroding global labor market and punishing cumulative living costs by a single sector isn`t really an economic progress – it is massive macroeconomic red flag.
[i] Chief Economists` Outlook, WEF, Sept 2026
