As U.S. tariff policies tighten and input costs climb, Texas firms are increasingly looking to artificial intelligence (AI) to maintain profitability, according to new data from the Dallas Federal Reserve. The May 2025 Texas Business Outlook Survey (TBOS) revealed a sharp uptick in AI adoption, with 59.1% of businesses reporting use of either traditional or generative AI, up from 38.3% a year earlier.
Generative AI, which autonomously creates new content, has driven much of this growth. Its adoption among surveyed firms jumped from 20% in April 2024 to 36% in May 2025. While only 5.4% of businesses used AI in 2018, the rapid increase since then places AI adoption rates on par with earlier waves of major technologies like the internet and personal computers.
The survey also found that about a quarter of firms plan to increase AI or automation use in response to higher tariffs, although most of these companies already use the technology. Less than 10% said they would adopt AI in the next year, suggesting that tariffs are intensifying existing use rather than driving new adoption.
Despite AI’s reputation as a labor-saving tool, TBOS responses indicate minimal impact on employment. Just 8% of firms reported needing fewer workers due to generative AI, while 3% saw increased labor needs. Most firms noted productivity gains and shifts in worker skill requirements rather than outright reductions in staff.
