While AI-driven capital spending is fueling record stock market gains and contributing to strong GDP growth, many small and mid-sized businesses across the U.S. are struggling to survive. For Cameron Pappas, owner of Norton's Florist in Birmingham, Alabama, the AI boom feels distant. His business, which generated $4 million in revenue last year, is under pressure from rising costs due to Trump-era tariffs and declining consumer spending. Pappas is cutting back on flower arrangements—reducing the number of stems in bouquets by three or four to keep prices stable. “We’ve just got an eagle eye on all of our costs,” he said. His efforts reflect a broader trend among small retailers: adapting creatively to survive, even as Wall Street celebrates AI’s transformative potential. Despite AI-related investments contributing 1.1% to GDP growth in the first half of 2025—surpassing consumer spending as a growth driver—many sectors are contracting. U.S. manufacturing spending has declined for seven consecutive months, and construction spending remains flat or down due to high interest rates and tariff-driven cost increases. Cushman & Wakefield projects that construction project costs will rise 4.6% in the fourth quarter compared to last year, largely due to tariffs on materials. The stock market paints a starkly different picture. Eight tech giants—Nvidia, Microsoft, Apple, Alphabet, Amazon, Meta, Tesla, and Broadcom—are now valued at $1 trillion or more, collectively making up 37% of the S&P 500. Nvidia alone accounts for over 7% of the index. Their shares have surged, with Nvidia up 40% in 2025, Broadcom up 50%, and Alphabet and Microsoft also rising nearly 40%. The S&P 500 and Nasdaq are up 15% and 20% year to date, respectively, despite a government shutdown and economic uncertainty. Yet, consumer-focused sectors are lagging. The S&P 500’s consumer discretionary and staples groups are up less than 5% this year. Target recently announced 1,800 corporate job cuts—the first major layoffs in a decade—and its stock has dropped 30% in 2025. Starbucks, after a $1 billion restructuring, has cut hundreds of nonretail jobs and is down 6% this year. Wyndham Hotels & Resorts saw its stock fall 25% after reporting weak results, citing a “challenging macro backdrop.” Even in the AI-boosted tech sector, layoffs are common. Microsoft cut around 9,000 jobs in July, citing organizational streamlining. Salesforce and others have also cut staff, saying AI can now handle certain tasks. But experts warn that AI is not a quick fix. Hatim Rahman, an AI professor at Northwestern’s Kellogg School, says businesses cannot expect immediate efficiency gains. “AI is not a plug-and-play solution,” he said. “It requires changes in people, processes, and culture—and it will take time.” Consumer sentiment reflects deepening anxiety. A Deloitte survey found that 57% of Americans expect the economy to worsen in the coming year, the worst outlook since 1997. Gen Z shoppers plan to spend 34% less this holiday season, while millennials expect to spend 13% less. Retail seasonal hiring is projected to fall to its lowest level since the 2009 recession. While AI is reshaping the economy, its benefits are unevenly distributed. For many small business owners like Pappas, the real economy remains a test of resilience, not innovation.