The Digital Foundation: How data, tech, and encrypted communications are reshaping the American economy

The American economy — once built on manufacturing floors, retail storefronts, and physical infrastructure — now increasingly runs on servers, software licenses, and encrypted data packets. That transformation is not subtle. In 2023, the United States tech sector contributed approximately $2 trillion to the country's gross domestic product, representing 8.9 percent of total GDP. More broadly, when measured as the "digital economy" — encompassing data processing, internet publishing, software, cloud services, and related activities — the figure climbs higher still: the Department of Commerce reported that the digital economy accounted for 10.2 percent of U.S. GDP in 2020, with real annual growth averaging 6.3 percent between 2012 and 2020, far outpacing the economy-wide expansion of 39 percent over the same decade. The trend is unmistakable: digital infrastructure and technology services are no longer peripheral to the economy; they are its engine.

The surge in tech's economic footprint has not been gradual. Analysis by the Information Technology and Innovation Foundation found that six tech industries alone — data processing and internet services, computer systems design, software publishing, broadcasting and telecommunications, e-commerce retail, and computer hardware — accounted for 35 percent of all U.S. GDP growth between 2013 and 2022. To put that in perspective: more than one-third of the economy's entire expansion during the past decade came from sectors that barely existed a generation ago. Traditional stalwarts like retail contribute roughly 5.5 percent of GDP, non-durable manufacturing adds 4.8 percent, yet the tech sector commands nearly double those figures and continues to grow at compound annual rates that dwarf almost every other industry category. Goldman Sachs Research estimates that technology sectors have contributed disproportionately to recent productivity gains, with labor productivity in the tech industry growing at 2 percent annually in recent years compared to about 1.5 percent pre-pandemic — a gap that compounds into transformational differences in output and income over time.

Data is the raw material of this new economy, and its volume and velocity are staggering. Between 2010 and 2020, value added in the IT sector increased by $600 billion — a 109 percent jump — with data processing, internet publishing, and information services experiencing growth of 215.1 percent. The sheer scale of information now generated, transmitted, and analyzed every second dwarfs anything seen before. By some estimates, humanity produces more data every two days than was created from the dawn of civilization through 2003. Cloud infrastructure services alone generated $330 billion in revenue in 2024, up $60 billion from 2023 and $102 billion from 2022, driven in large part by artificial intelligence workloads and big-data analytics. Forrester forecasts that U.S. tech spend will reach $2.4 trillion in 2024, growing at 5.5 percent, faster than the overall economy. This data-centric transformation is not confined to obvious tech hubs: 94 percent of enterprises worldwide now use cloud computing, and in the financial services sector, 98 percent of organizations report using some form of cloud infrastructure. The implications are profound — the ability to collect, transmit, store, and analyze data at scale has become foundational to competitive advantage across nearly every sector of the economy.

Encryption sits at the heart of this digital infrastructure, a fact often invisible to users but critical to the functioning of modern commerce and communication. Without encryption, online banking would be impossible, e-commerce untenable, and corporate communications vulnerable to industrial espionage and state-sponsored hacking. The encryption software market was valued at $16.7 billion in 2024 and is projected to reach $60.7 billion by 2033, growing at a compound annual growth rate of 15.4 percent. That growth reflects not hype but necessity: as of 2024, more than 85 percent of all websites use HTTPS, the encrypted protocol that protects data in transit, up from negligible adoption rates a decade ago. The secure communication market — encompassing encrypted messaging, virtual private networks, and secure data transmission — is projected to grow from $34.5 billion in 2024 to $65.2 billion by 2033, a compound annual growth rate of 7.3 percent, driven by rising cyber threats and stringent regulatory mandates.

Enterprise adoption of encryption has become routine rather than exceptional. Surveys show that 56 percent of enterprises had extensive encryption deployed on their internet communications as of 2021, with another 27 percent having partial deployments. Nearly 60 percent of companies reported extensive encryption on backup and archive systems. The financial and healthcare sectors — bound by regulations like PCI-DSS, HIPAA, and similar compliance frameworks — lead in adoption, but encryption has become standard practice across industries. Cloud service providers now encrypt data-at-rest by default, with 65 percent of enterprises using "bring your own key" models for added control and 19 percent implementing "hold your own key" strategies for high-security workloads. Post-quantum encrypted traffic, designed to resist decryption by future quantum computers, reached 13 percent of TLS 1.3 traffic during 2024, a figure expected to grow rapidly as browser platforms and operating systems implement post-quantum cryptography by default. The encryption layer is no longer an add-on; it is baked into the architecture of modern digital commerce.

Encrypted communications underpin not just security but also productivity and coordination. End-to-end encrypted messaging platforms — Signal, WhatsApp, and Telegram's secret chats among them — have moved from niche tools used by privacy advocates and journalists to mainstream business communication channels. The network encryption market was valued at $4.9 billion in 2024 and is expected to reach $9.5 billion by 2033, a growth rate of 7.5 percent, driven by the rapid incorporation of cloud computing, artificial intelligence, and the Internet of Things into business operations. Every video conference, every file transfer, every API call between distributed systems increasingly relies on encrypted protocols to prevent interception and ensure data integrity. Global internet traffic grew by 17.2 percent in 2024, and a growing share of that traffic — both consumer and enterprise — is encrypted by default. The economic implication is clear: the ability to move information securely and at scale is now a prerequisite for participating in the modern economy, and companies that fail to implement robust encryption risk not only cyberattacks but also regulatory penalties, reputational damage, and loss of customer trust.

The integration of data, tech infrastructure, and encrypted communications extends far beyond the traditional technology sector. Healthcare providers plan to increase third-party technology spending, with 88 percent of U.S. healthcare organizations investing more in 2023 and 2024, much of it directed toward virtual care, telemedicine platforms, and AI-powered diagnostics. The financial services sector saw robust technology spend even through the Federal Reserve's aggressive interest-rate hikes and the collapse of Silicon Valley Bank in 2023, with major institutions like JPMorgan Chase, Citigroup, and Bank of America growing their technology budgets with a focus on cloud, digital transformation, data platforms, and customer experience. Manufacturing increasingly leverages cloud computing for supply-chain visibility, real-time data analytics, and integration of 3D printing technologies. Retail, once defined by physical storefronts, now sees e-commerce and digital logistics as central to operations. The BFSI (banking, financial services, and insurance) segment alone accounted for 24 percent of cloud computing revenue in 2024, with retail, healthcare, and professional services following closely. The trend is clear: digital tools, data analytics, and encrypted communication channels have become critical inputs across the economy, not luxuries confined to Silicon Valley.

The workforce reflects this shift. As of 2020, the IT industry employed 5.9 million people directly — 4.4 percent of all private-sector jobs — with workers earning on average more than twice the median American wage. When multiplier effects are considered, the industry supports approximately 19 percent of all jobs in the United States. The Bureau of Labor Statistics forecasts that over the next decade, jobs for data scientists, information security analysts, and software developers will grow by 35 percent, 32 percent, and 26 percent respectively, far outpacing overall job growth projections. Moreover, the IT industry provides well-paying opportunities for Americans without college degrees, with such workers earning roughly 50 percent more in the tech sector than in non-tech industries. The economic mobility implications are significant: tech jobs offer pathways to middle-class stability that have eroded in other sectors, and the geographic distribution of these jobs — increasingly dispersed as remote work becomes normalized — has the potential to reshape regional economic development patterns.

That diffusion, however, comes with complications. Cybersecurity spending has become a major budget line for enterprises, with 78 percent of global cyber insurers now requiring encryption standards such as TLS 1.3 and AES-256 to qualify for coverage. Encryption can reduce breach-related costs by up to $2.5 million, according to IBM's 2025 Cost of a Data Breach Report, making it a strategic investment rather than a technical nicety. Yet only 30 percent of organizations know exactly where their cloud budget goes, and 78 percent detect cloud cost anomalies too late to act effectively. The complexity of managing hybrid and multi-cloud environments, combined with rapid adoption of AI workloads — generative AI now accounts for roughly half of cloud market growth — has left many companies struggling to optimize spending. Cloud waste is endemic: companies waste an average of $135,000 on unused SaaS software licenses, and 97 percent of enterprise cloud apps are "unsanctioned," meaning individual teams or departments purchase tools without centralized oversight. The economic cost of this inefficiency is substantial, and it underscores a broader point: the migration to a data-driven, cloud-based, encrypted economy requires not just capital investment but also organizational change, workforce training, and governance structures that many enterprises are still building.

International competition adds urgency to these dynamics. North America accounted for 39 percent of global cloud computing revenue in 2024, but other regions are closing the gap. The European Union has implemented ambitious data-sovereignty initiatives, and countries across Asia-Pacific are building domestic cloud infrastructure and launching government-led programs to accelerate digital transformation. The United States leads in AI research, venture capital for tech startups, and deployment of cutting-edge infrastructure, but that lead is not guaranteed. Trade policies, immigration rules that affect the tech workforce, investment in public research and development, and the regulatory environment for data and privacy all influence whether the United States maintains its position as the global center of the digital economy. The fact that Amazon Web Services holds 32 percent market share, Microsoft Azure 23 percent, and Google Cloud 12 percent reflects current dominance by U.S.-based firms, but those numbers are subject to geopolitical and competitive pressures that could shift the landscape within a decade.

The economic implications of ubiquitous encryption are particularly nuanced. On one hand, encryption enables trust in digital transactions and protects intellectual property, customer data, and sensitive business communications from theft and espionage. On the other hand, debates over "lawful access" — whether governments should be able to compel technology firms to create backdoors or exceptional-access mechanisms — persist in policy circles, with law enforcement arguing that strong encryption impedes criminal investigations and civil-liberties advocates warning that any weakening of encryption would undermine the security and competitiveness of U.S. firms. The economic stakes are real: a requirement for universal backdoors could drive multinational corporations to relocate data infrastructure to jurisdictions without such mandates, and it could erode consumer confidence in American technology platforms. Conversely, the absence of any mechanism for lawful access in serious criminal cases — terrorism, trafficking, large-scale fraud — creates friction in international law enforcement cooperation and raises questions about the balance between security and privacy. The policy conversation is difficult precisely because both values — protecting commerce and civil liberties through strong encryption, and enabling effective law enforcement — are real and legitimate.

Looking forward, the trajectory is clear. By 2027, estimates suggest that the tech industry's share of U.S. GDP will exceed as much as 51 percent, up from 8.9 percent in 2023. If the digital economy continues to grow at the same annual rate seen over the past decade — a reasonable assumption given the acceleration of AI adoption, the expansion of cloud infrastructure, and the continued digitization of traditional industries — it could account for half of the U.S. GDP by 2027. Goldman Sachs Research forecasts that U.S. potential GDP growth will average about 2.1 percent through 2029, with AI-driven productivity gains accelerating growth to 6.2 percent in the early 2030s. These are not marginal shifts; they represent a fundamental reordering of economic activity.

That reordering carries risks as well as opportunities. The concentration of economic value in a small number of technology platforms raises antitrust concerns, questions about market power, and debates over the appropriate regulatory framework for digital services. The displacement of workers in industries disrupted by automation and AI-driven efficiency — from retail to logistics to customer service — creates social and political pressures that cannot be ignored. The environmental cost of operating massive data centers, though improving with renewable energy adoption, remains significant. And the geopolitical dimension — competition with China over AI leadership, European regulatory challenges to American tech firms, questions about supply-chain resilience for semiconductors and hardware — adds complexity to any assessment of the future trajectory of the U.S. digital economy.

Yet the fundamental point remains: data, tech infrastructure, and encrypted communications have become central to how the American economy functions. They are not a sector in the traditional sense; they are the connective tissue that enables productivity, innovation, and coordination across all sectors. The financial system depends on encrypted transactions, healthcare depends on secure data management, manufacturing depends on cloud-based analytics, retail depends on e-commerce platforms. The migration of economic activity onto digital platforms is likely to continue, and with it, the importance of data security, encryption, and technology infrastructure will only grow. Policymakers, business leaders, and citizens must grapple with the implications — how to invest in digital infrastructure, how to regulate it, how to ensure that its benefits are widely shared, and how to manage the tradeoffs between security, privacy, and law enforcement. The stakes are high because the economic foundation has shifted, and the decisions made in the next few years will shape the trajectory of the U.S. economy for decades to come.