How AI Is Helping Traditional Startups Grow While Reshaping the U.S. Economy

Michelle Turner never imagined that artificial intelligence would become one of the most valuable tools in turning her vision into reality. As a first-time entrepreneur and foster parent, she wasn't building an AI company. Instead, she used the technology as a guide, mentor and business advisor while creating Here Now Health , a mental health platform focused on supporting children entering the foster care system. What started as an idea in her Virginia Beach home has rapidly evolved into a growing healthcare company. Launched in January 2025, Here Now Health now employs 16 people and is certified in three U.S. states to provide Medicaid-funded mental health counseling for foster children—addressing a critical gap in care that Turner witnessed firsthand through her experience as a foster mother. For Turner, AI became the equalizer that helped bridge the experience gap many first-time founders face. "A mom of six kids who's a first-time founder, who's a sole female founder, should not be able to raise (venture capital). I don't have an MBA. I don't have these things to back me up," Turner said. She explained that AI became much more than a writing assistant. "It was like going to a master's level class every day from the robot. It was my startup advisor." Using AI-powered tools, Turner educated herself about startup culture, developed her business strategy, refined investor presentations and prepared funding pitches that ultimately helped attract venture capital. Her story is emerging at a time when artificial intelligence is becoming one of the biggest forces shaping the U.S. economy. Policymakers, economists and business leaders are closely examining whether AI will drive productivity and economic growth—or disrupt millions of jobs in the process. The issue has become so significant that the U.S. Federal Reserve has established a dedicated panel to study AI's impact as part of a broader economic review launched by Chairman Kevin Warsh. Officials are trying to determine whether AI could allow businesses to produce more with fewer workers, potentially boosting economic growth while keeping inflation under control. However, those same efficiency gains have also sparked concerns about rising structural unemployment and whether AI could widen the gap between returns to capital and workers' wages. Across industries, companies are racing to capitalize on AI's capabilities. Unlike the early internet era, when firms such as Yahoo! and America Online competed to connect people online, today's AI companies are developing tools capable of writing software, solving complex problems and automating tasks that once required human expertise. The rapid expansion has also triggered massive investment in data centers, increasing demand for electricity, infrastructure and skilled labor while raising concerns about long-term costs. Jean Boivin, Head of the BlackRock Investment Institute, said investors remain divided between two competing visions of AI's future. "Markets are confronted with dramatically different competing narratives." He described today's economy as balancing between scarcity and abundance. "Scarcity is the story of the moment," Boivin said, referring to the investment boom that is driving up costs and increasing demand for capital. At the same time, he believes AI could unlock enormous opportunities. "We are also talking about abundance.... We are talking about AI that can lead to significant breakthroughs... Growth that might be breaking out of a 2% world." Turner's experience represents what many experts believe could become a growing trend: traditional businesses using AI not as their product, but as a powerful business tool. John Bailey, a nonresident senior fellow at the American Enterprise Institute who advised one of Here Now Health's investors, said AI is dramatically lowering the barriers to entrepreneurship. "Things that used to take too much time or cost too much—the price to access has fallen close to zero," Bailey said. He added: "It is empowering entrepreneurs to scale faster and hire people. These are not AI companies. They are traditional companies trying to deliver services but do it faster, cheaper." While public discussion often centers on AI replacing workers, Bailey believes the technology is more likely to transform jobs than eliminate them entirely, much like previous waves of technological innovation. Apollo Global Management Chief Economist Torsten Slok shares a similar outlook, arguing that AI is making it significantly easier and less expensive to launch businesses. According to Slok, the recent increase in new business formations reflects how AI is reducing the complexity of entrepreneurship, and as those companies expand, they are expected to create new employment opportunities. Still, economists acknowledge that the full impact of AI on the labor market may take years to unfold. Although recent job growth in the United States has eased fears of widespread technology-driven unemployment, Federal Reserve officials continue to monitor potential risks. Richmond Federal Reserve President Thomas Barkin said businesses frequently tell him AI is helping address labor shortages rather than replacing workers outright. "We are all quick to see the disasters, which is about jobs getting replaced," Barkin said. Instead, many manufacturers and auto repair companies continue struggling to find enough qualified workers and are using AI to improve productivity among existing staff. "They cannot get enough workers," Barkin noted. However, he acknowledged that certain white-collar professions could face greater disruption. "It is still going to be a challenge. It is a 'rust-belt risk'," Barkin said, adding, "we are not an economy that has no shortages." Experts also warn that the transition could mirror previous economic shifts. The globalization boom of the 1990s devastated many American manufacturing communities, leaving lasting economic and social consequences. Researchers from the Brookings Institution and Opportunity@Work recently warned that nearly 23 million Americans—particularly clerical and administrative workers without college degrees—could see their career progression threatened as AI automates jobs that traditionally served as stepping stones to higher-paying positions. The study concluded: "Disruptions in these roles can have outsized effects on workers' ability to move into higher-wage work." According to the researchers, states including Florida, Texas, California and several parts of the Northeast could experience the greatest impact because of their concentration of office-based occupations that are highly exposed to AI. For the Federal Reserve, understanding both the speed and outcome of AI adoption remains critical. Officials believe the short-term disruptions could differ significantly from the long-term economic benefits if AI ultimately delivers the productivity gains many economists anticipate. Despite concerns, Federal Reserve Chairman Kevin Warsh remains optimistic about the technology's long-term promise. At his debut press conference, Warsh described artificial intelligence as: "The most important economic change that we've had in my adult lifetime." He added that the United States would ultimately benefit from AI, while acknowledging that the transition would not be without challenges. "That certainly doesn't mean it's not going to be disruptive," Warsh said.