The U.S. economy's underlying strength has been easy to miss. High gas prices and weak consumer sentiment over the cost of living have obscured just how robust conditions have been lately: not only has the economy absorbed the shocks of President Donald Trump's tariffs and the war on Iran, it has been running hot.

Federal Reserve policymakers effectively recognized as much when they raised interest rates earlier this month to rein in inflation, judging the economy not merely resilient but thriving.

Yet that strength cuts both ways. The prospect of a hot economy adding further inflationary pressure has sent Treasury yields soaring, creating a heavier burden for servicing $40 trillion in U.S. debt. The result is an economy stuck on a hamster wheel—scurrying to outrun its borrowing costs, because any loss of speed would allow debt to grow faster than the economy itself.

Growth Is Still Winning the Race

For now, GDP is staying ahead of interest rates. Inflation-adjusted growth has been running around 2%, while nominal growth, which includes inflation, has been well above 6%—still more than the 5.16% 10-year Treasury yield, the government's benchmark long-term borrowing cost, even after it jumped more than a full percentage point since the Iran war began. The gap between those two rates is the number that decides the debt math: growth above borrowing costs steadily lightens the load relative to the size of the economy, while the reverse lets interest compound faster than the tax base that funds it. Third-quarter growth could show even more acceleration: a recent gauge of U.S. business activity for September hit a five-year high.

The AI Boom Is the Engine

The AI boom has a lot to do with that momentum. Capital expenditures from Alphabet, Amazon, Microsoft, Meta, Oracle, and SpaceX—the so-called hyperscalers—are projected to $870 billion this year, up from $470 billion in 2025, and S&P Global estimated last month that spending by the handful of hyperscalers will exceed $1.3 trillion in 2027. According to economist Stijn van Nieuwerburgh, the AI build-out is on track to top the railroad mania as the biggest boom in U.S. history.

The flood of capital is also spreading beyond the tech sector into the so-called old economy. Industrial stalwarts such as Caterpillar and GE have been among the biggest beneficiaries of the data center frenzy.

"The breadth and magnitude of the AI investment impulse spilling over to other sectors is as surprising as it is extensive," UBS economist Jonathan Pingle wrote in a note on Wednesday. "The demand impulse from AI appears to be spilling over to help create demand for capex outside of tech."

Washington is supplying stimulus of its own. The federal government's $2 trillion annual budget deficit represents more fuel for growth: much of the money the government raises by selling debt goes into consumers' pockets, primarily via entitlement payments, which eventually boost profits and stock valuations, Research Affiliates said in a note early this year.

How Long Can the Math Hold?

Some Wall Street analysts have been warning that the AI bubble is poised to pop soon, hobbling the economy's hottest engine. Instances of AI agents going rogue, along with fears the technology could even wipe out humanity, have led to calls for slowing development—and perhaps investment as well. Higher borrowing costs could also cool AI spending.

Rockefeller International Chairman Ruchir Sharma has predicted the bubble could pop when the 10-year yield decisively exceeds 5%, signaling a "new era of tighter money, in which AI mega projects will be harder to fund." Yields topping 5% would also start to approach nominal GDP growth, making the national debt even more unsustainable, he pointed out in a recent Financial Times op-ed.

That is precisely what worries the Committee for a Responsible Federal Budget. The budget watchdog has been sounding the alarm for years about the trajectory of U.S. debt and expects GDP growth to eventually fall behind the cost of borrowing.

"With interest rates on new Treasury bonds and notes at around 5% and medium-term nominal economic growth expected to be closer to 4%, the U.S. is entering a debt spiral," CRFB said Wednesday. "This could lead to a fiscal crisis, which could result in exploding unemployment rates, crashing asset values, surging inflation, falling incomes, sharp and unexpected increases in taxes and cuts in government support, or some combination."

Why Yields May Not Fall

Slower economic growth, after all, would not necessarily bring bond yields down. They have been rising for a number of reasons. Other heavily indebted countries and AI hyperscalers are competing for bond investors' capital, so auctions require attractive yields to draw sufficient demand.

The geopolitical environment adds more pressure. Recent wars, trade friction, and disasters have produced shocks so frequent that they are no longer seen as one-off events but as a sign of a less stable world—and that risk gets priced into yields too.

The Fed's willingness to keep a lid on inflation remains a wild card. Chairman Kevin Warsh has earned some credibility with his hawkish stance, but the market could quickly turn on him and reverse the favorable GDP-debt math the U.S. currently enjoys.

"In the past, especially during the 1980s, the Bond Vigilantes pushed the bond yield above nominal GDP to slow the economy," Wall Street veteran Ed Yardeni, who coined the "Bond Vigilantes" term in the 1980s, wrote in a note on Wednesday. "They haven't done that so far. The risk is that they will do that if the Fed fails to subdue inflation."

This story was originally featured on Fortune.com.