Accelerating GDP and Exploding Profits: Why The US Economy is Hitting 'Warp Speed'

“Ahead warp factor one, Mr. Sulu.” — Captain James T. Kirk

The current economic and market set up is a pretty remarkable one of strong and accelerating macroeconomic growth, a strong and accelerating topline growth rate, as well as (and most importantly!) strong and accelerating earnings and profits.

The global economy has a strong underpinning to it, driven mostly by the US. And in the US, the accelerating growth in GDP is driven by the trillion dollar AI cap ex cycle and all the wondrous effects on the broader economy that go with it -- the pipefitters, the electricians, the tractors, the construction workers, the bars and restaurants and communities around any data center build are benefitting strongly. 

If the US GDP is expanding at 6% right now, which the data seem to confirm right now, that’s getting near to the best growth rates we’ve seen in the last sixty-five years, and a rate at which the US has only been able to reach a handful of other times over that time frame as shown in the chart from The World Bank below. 

Perhaps more important is the effect that AI (and to a lesser extent at this very early stage, Robotics) is having on profitability and enabling more cents from each dollar of revenue generated to fall to the bottom line. A 6% topline growth rate is very impressive for the world’s largest economy, but it gets even more mindblowing when you realize that profit margins are expanding at an even more rapid pace, making earnings growth spike. Topline spend, ie GDP, is mostly a measure of revenue in the economy and that’s important because it’s that revenue generation that creates the flywheel of economic activity growth. But again, the more important factor are earnings and profits which are the magic that build wealth and prosperity for a society and the current estimates for 2026 S&P 500 year-over-year earnings growth rate stands at about 24%. That big number there is a continuation of a trend of accelerating earnings growth: 

Projected 2026 Earnings Growth

• Q2 2026 Estimate: +23.3%
• Full-Year 2026 Estimate: +24.1% 

S&P 500 Trailing 12-Month (TTM) Earnings Growth by Quarter

• March 31, 2026: 28.6%
• Dec 31, 2025: 14.8%
• Sept 30, 2025: 16.9%
• Jun 30, 2025: 13.58%
• Mar 31, 2025: 13.22%
• Dec 31, 2024: 9.22%
• Sep 30, 2024: 8.69% 

So, yeah, what we’re navigating right now is a pretty remarkable set up of a strong and accelerating macroeconomic growth, a strong and accelerating topline growth rate, as well as (and most importantly!) strong and accelerating earnings and profits.

One primary reason for all this acceleration of revenues and profitability is that people are indeed figuring out millions of new applications, services, ideas, businesses, etc that use AI to make their supply chains more efficient or to make their customer interactions more seamless and so on. I’ve just finished the book called “The Thinking Machine: Jensen Huang, Nvidia, and the World’s Most Coveted Microchip” and it talks about how Jensen was willing to bet the entire company on the idea of The AI Revolution because, while he didn’t know all the ways people and companies and every entity on the planet would end up using AI, he did know that they would be using it. And a large part of that usage today is all about helping companies expand their earnings margins and overall profitability. 

And the entirety of the economic, revenue and earnings/profitability acceleration is all based on Revolutionary Technology. It’s all built upon the technological platforms that enable all this magic to work and feed upon itself in a beautiful flywheel virtuous loop.

Last year when China’s tech stocks did well, I often had to explain why we were avoiding them. As China’s tech stocks have mostly fallen 20-30% this year, we are not getting that question any more. While I do think that Alibaba and TenCent and some of the other China tech stocks are probably good trades to the upside here, our analysis and 3-year, 5-year and 7-year forward-looking financial models that we build for each company we ever analyze, continue to keep us focused on US tech investments. Indeed, the US’ lead in AI and Space is increasing, not decreasing.

Indeed, as evidenced by the data this year, the US is keeping the global economy afloat at this point. Europe and China are both struggling from a lack of investment and revenue growth and other internal factors (like, uh, real estate collapse in China for example which has now wiped out the last 20 years of gains). 

US stocks are probably cheaper than Europe or China stocks, especially if you are looking out five or seven years. Here’s a important chart and a great quote from one of my followers on X, who happens to also be one of the greatest tech investors and the creator of the Internet browser. I agree with him: 

The AIRS Revolution is just getting started. AI, Robotics and Space. It’s all happening and it’s all accelerating and the markets will follow the earnings over time, as they always do. Earnings growth is set up to blow people’s minds as AI’s impact gets ever bigger and mainstream functional Robotics are just around the corner -- and they will continue to expand margins to never-before-seen levels, just like the Internet, Smartphone and other Tech Revolutions have over the last 25 years. 

The upshot of all this is that I remain more excited about our stocks, the valuations of these stocks, the models that we’re building for these companies, and the set up for Revolution Investors than I’ve ever been since I started doing this nearly 30 years ago. 

We'll do the Live Q&A Chat this Wednesday (July 7) at 12:00pm ET in the Discord channel, or you can email your questions to support@tradingwithcody.com.