Why rapid AI breakthroughs are not translating into faster economic growth

The piece argues that the so-called AI boom mirrors past digital waves that failed to lift productivity because enterprises did not restructure deeply enough. McKinsey’s latest data reveal that almost all large firms experiment with AI, but a tiny minority achieve high performance, largely by overhauling end-to-end processes—a step taken by only about one-fifth of adopters. Meanwhile, AI-heavy stocks dominate the S&P 500, inflating market returns that disappear when those firms are excluded.

The author links stagnant growth to an "overhead trap" where government spending, corporate SG&A and compliance costs exceed 47% of GDP, a level that coincides with sub-2.5% growth rates. Historical parallels with electrification show that when technology spreads equally to consumers and firms, productivity rises; today, service-heavy economies resist such gains. The conclusion is that AI will only shift macro trends when it penetrates core operations across the broad sectors that drive employment and GDP.