China’s Scaling Prowess Comes For Fusion
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Moonshot Capitalism: AI Rewrites The Venture Capital Playbook
AI Summary. Deep-tech investment outside AI has exceeded $150bn since early 2024, surpassing the $133bn invested across the entire prior decade. Falling valuations for traditional software companies and outsized returns from early bets on capital-intensive ventures are pushing investors toward riskier, science-driven deals.
Tim Bradshaw Financial Times- Date Posted:
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Since the start of 2024, more than $150B of venture capital has been invested into non-AI “deep tech” firms whose products are rooted in significant engineering advances, exceeding the $133B invested in such firms btw 2010 and 2019.
Are investors abandoning software for capital-intensive science bets?
Core argument: Deep-tech investment excluding AI exceeded $150bn since early 2024, surpassing the entire $133bn deployed across the prior decade (through end-2019), as falling valuations for traditional software push venture capital toward capital-intensive scientific bets.
The AI boom is fuelling a resurgence in ambitious “moonshot” bets, as early SpaceX backers’ huge returns and falling valuations for traditional software companies force tech investors to embrace riskier and more capital-intensive dealmaking. Excluding the giant sums ploughed into AI start-ups, global investment in “deep tech” — companies whose products are rooted in big scientific or engineering advances — has exceeded $150bn since the start of 2024, more than the $133bn in the entire decade to the end of 2019, according to Dealroom. This year’s deep-tech investments have not yet surpassed 2021’s peak, which was propelled by battery and electric vehicle deals for the likes of Rivian and Northvolt — many of which turned sour, highlighting the risks involved in moonshot dealmaking.Takeaways by Macro Roundup® AI
- Deep-tech investment excluding AI exceeded $150bn since early 2024, surpassing the entire $133bn deployed across the prior decade (through end-2019), as falling valuations for traditional software push venture capital toward capital-intensive scientific bets.
- The 2021 deep-tech peak — driven by battery and electric vehicle deals including Rivian and Northvolt — has not yet been surpassed, and the subsequent losses from those deals underscore the capital destruction risk inherent in moonshot dealmaking.
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- Capital Is Making a Comeback — Btw 1985-2021 the capital intensity of the American economy was relatively flat as a rise in intangible investment was offset by a decline in tangible…
- Public to Private Equity in the United States: A Long-Term Look — Global venture capital returns are highly skewed: 62% of deals lose money, more than half lose 50–100% of invested capital, but fat-tailed outliers drive overall returns. This pattern mirrors historical whaling voyages, where payoffs were similarly variable and driven by rare outsized outcomes.
- Gross and Net US Investment — Net investment has fallen from ~40% of gross investment in the 1970s to ~25% today, meaning three-quarters of gross investment merely replaces depreciating assets. The shift toward faster-depreciating information technology assets requires larger gross investment increases to achieve any given gain in productive capital per worker.
Gross and Net US Investment
AI Summary. Net investment has fallen from ~40% of gross investment in the 1970s to ~25% today, meaning three-quarters of gross investment merely replaces depreciating assets. The shift toward faster-depreciating information technology assets requires larger gross investment increases to achieve any given gain in productive capital per worker.
Timothy Taylor Conversable Economist- Date Posted:
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U.S. real net private domestic investment—which adds to the American capital stock—is now only ~25% as large as gross investment, down from ~40% in the 1970s. Taylor suggests the widening gap between gross and net investment reflects the relatively rapid depreciation of IT-related capital.
Does faster asset depreciation explain slowing productivity growth?
Core argument: Net investment has fallen from ~40% of gross investment in the 1970s to ~25% today, meaning three-quarters of gross investment now merely replaces depreciating capital rather than expanding the productive stock.
The figure divides net investment by gross investment. Back in the 1970s, net investment was often around 40% of gross investment, but the share has been slumping over time. For the last decade or so, net investment has been about 25% of the gross–that is, about three-quarters of gross investment is just making up for depreciation of the pre-existing capital stock. The likely reason for the growing gap between gross and net investment is that modern investment is more likely to be related to information technology [which] depreciates more rapidly and thus needs to be replaced and updated more often. If we want the average US worker to be using a greater amount of capital on the job–which was one of the key drivers of rising labor productivity in the past–it now takes a bigger rise in gross investment to lead to a given rise in net investment.Takeaways by Macro Roundup® AI
- Net investment has fallen from ~40% of gross investment in the 1970s to ~25% today, meaning three-quarters of gross investment now merely replaces depreciating capital rather than expanding the productive stock.
- The shift toward information technology — which depreciates faster than physical machinery — is the primary driver of the widening gap between gross and net investment.
- Raising capital per worker, a historic engine of labor productivity growth, now requires a substantially larger increase in gross investment than it did several decades ago.
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Understanding AI and Productivity
AI Summary. U.S. productivity growth has accelerated to ~2.2% annually since mid-2022, above the 2010s baseline, though pandemic-era labor market and business formation dynamics likely contributed alongside AI. Historical general-purpose technology booms sustained labor productivity growth above 2.5% for a decade or more, making the current acceleration substantial but not unprecedented.
Chad Syverson Economic Innovation Group- Date Posted:
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Syverson is skeptical that AI initiated the rise in productivity growth that began in 2023. The acceleration began while AI investment was small, and pandemic-era labor market churn and business dynamism match the acceleration’s start.
Is AI-driven productivity growth sustainable at historical technology boom levels?
Core argument: U.S. labor productivity has grown at roughly 2.2% annually since mid-2022, a pace exceeding the 2010s trend and, if sustained, implying GDP per capita roughly 7% higher within a decade than the prior trajectory.
Productivity from mid-2022 on has maintained a faster-than-2010s trajectory involving annual growth of about 2.2%. Could this acceleration be due to AI? Perhaps. The timing leans against AI being the sole initial cause. Additionally, there were well-documented increases in economic dynamism (labor market churn and business formation) during the pandemic emergence whose timing matches the acceleration’s start. Regardless of AI’s current effect, the longer the aggregate productivity acceleration continues, the more plausible it is that AI is an important driver. As for the magnitude, a sustained increase from 1.5 to 2.2% annual productivity growth would be substantial (after a decade, GDP per capita would be 7% higher than otherwise), but hardly unprecedented. The 1995–2004 productivity boom saw annual productivity growth of nearly 3% per year, and other past general-purpose-technology-related productivity boosts saw labor productivity growth in excess of 2.5% for a decade or longer.Takeaways by Macro Roundup® AI
- U.S. labor productivity has grown at roughly 2.2% annually since mid-2022, a pace exceeding the 2010s trend and, if sustained, implying GDP per capita roughly 7% higher within a decade than the prior trajectory.
- The 1995–2004 productivity boom averaged nearly 3.0% annual growth, establishing that a durable AI-driven acceleration to 2.2% would be meaningful but well within historical precedent for general-purpose-technology cycles.
- Pandemic-era surges in labor market churn and business formation align more precisely with the productivity acceleration’s start date than AI adoption does, complicating AI-as-sole-cause narratives.
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- AI and Productivity — Rising US labor productivity is driven by higher capital utilization—factories, servers, and hotel rooms running harder—rather than new investment or efficiency gains at the individual task level.
- Google’s AI & Economy ATLAS v1.0: Mapping Gemini Usage in the Economy — Google’s new AI & Economy ATLAS maps 15M AI interactions to occupations, tasks, and activities, showing AI use is pervasive but not intensive…
- Writing Code vs. Shipping Code: Productivity Effects Across Generations of AI Coding Tools — Event studies indicate that adoption of AI coding tools raised “commits” (saved code updates) ~180%, but releases by only ~30%. Large upstream…
US Widens AI-Driven Investment Gap With Europe
AI Summary. US corporate investment in equipment and facilities is projected to grow 40% in real terms by the end of next year, versus 12% in the euro area, widening a productivity gap where output per hour worked rose $14 in the US compared with $2 in Europe since 2018.
Sam Fleming, Amy Borrett and Olaf Storbeck Financial Times- Date Posted:
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Oxford Economics projects US real business investment will rise 40% over 2021–2027, ~3x the euro area’s 12%. US investment growth since 2024 has been largely information processing and software, but high US growth in GDP/hour is not “merely digital.”
Is artificial intelligence investment widening the transatlantic productivity divide?
Core argument: U.S. corporate investment in equipment and facilities is projected to rise 40% in real terms between 2021 and end-2026, versus 12% in the euro area and near-zero growth in Germany, sharply widening the transatlantic capital-spending gap.
Corporate spending on new equipment and facilities in the US is projected to increase 40% in real terms between 2021 and the end of next year, according to forecasts from Oxford Economics. The US surge compared with a real-terms increase of just 12% in the euro area, while German business investment is expected to have all but stagnated over the same period. Europe also faces a large and growing productivity gap with the US. “The United States has recently pulled further ahead of Europe,” Bart van Ark, a professor at the University of Manchester, told policymakers at the ECB Forum in Sintra. GDP per hour worked increased $14 in the US between 2018 and 2025, compared with just $2 in Europe. “The gap is not only a digital sector story,” added van Ark, stressing that the US outperformance extended to other sectors, including wholesale and retail as well as professional services.Takeaways by Macro Roundup® AI
- U.S. corporate investment in equipment and facilities is projected to rise 40% in real terms between 2021 and end-2026, versus 12% in the euro area and near-zero growth in Germany, sharply widening the transatlantic capital-spending gap.
- U.S. labor productivity rose $14 per hour worked between 2018 and 2025, versus $2 in Europe, with outperformance spanning wholesale, retail, and professional services—not solely the digital sector.
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Why Big Tech’s AI Spending Is $3 Trillion Higher Than It Seems
AI Summary. Nine major technology companies carry ~$3tn in off-balance-sheet AI commitments — 5x their ~$600bn in reported capital spending — obligations that are growing faster than traditional investment and triple their combined lease and debt liabilities.
Peter Rudegeair and Peter Santilli Wall Street Journal- Date Posted:
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A WSJ analysis finds 9 firms involved in the data center buildout have ~$3T in off-balance-sheet commitments largely tied to AI infrastructure. The growth in such obligations has outpaced the firms’ capex growth over the last year.
Are technology companies hiding the true cost of artificial intelligence?
Nine top tech companies had some $3 trillion of off-balance-sheet commitments mostly related to AI, according to a Wall Street Journal analysis of footnotes in their most recent securities filings. Those obligations are growing faster than traditional “capex,” which totaled about $600 billion over the past year they reported, and were about triple what the companies owe under their outstanding leases and long-term borrowings.Related Articles:
- The Hyperscalers’ Exploding ‘Purchase Commitments’ Reach $1.5tn — Major technology companies have accumulated $1.5tn in lease commitments and $982bn in purchase obligations for chips, computing power, and energy, totaling roughly $2.5tn in future spending. Much of this debt does not appear on standard financial statements, understating true leverage and future cash demands.
- The Market Is Asking Questions — AI infrastructure debt spreads are widening as markets question whether returns on massive, front-loaded capital spending will outpace financing costs before assets depreciate. If compute demand plateaus from efficiency gains or slow adoption, the industry faces a glut of expensive, rapidly depreciating capacity.
- Big Tech Credit Risks Rise Sharply As AI Spending Soars — The cost of insuring major technology companies' debt against default has reached record highs, driven by surging AI infrastructure spending that is straining balance sheets and pushing credit ratings toward junk status.
AI Is Driving Up Treasury Yields: ‘It Just Touches Everything’
AI Summary. Heavy corporate bond issuance driven by AI investment has reduced demand for long-term government debt, pushing 10-year Treasury yields up ~0.3 percentage points as investors rotate into higher-yielding corporate bonds.
Davide Barbuscia, Ye Xie, and Michael MacKenzie Bloomberg- Date Posted:
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US investment-grade debt issuance is up 36% y/y to ~$1.5T. A BofA analysis argues the surge in this debt, alongside increased MBS issuance, has driven up the 10-year Treasury yield by ~.3pp this year.
Is artificial intelligence investment reshaping the government bond market?
[In 2026] investment-grade companies have sold nearly $1.5 trillion of bonds, a 36% jump from a year earlier, putting them on pace to eclipse the record from 2020, when businesses were rushing to seize on near-zero interest rates. As the slew of longer-dated bonds keeps hitting the market, some investors have sold US Treasuries. That freed up cash to buy higher-yielding debt from immensely profitable companies like Alphabet, whose recent 30-year debt was issued at a yield of nearly 6.4%, 1.15 percentage points more than comparable Treasuries. Quantifying the precise impact on interest rates is difficult and estimates vary. Bank of America economists said the AI borrowing is “potentially crowding out long-end Treasury demand” and has played a major role in the rise of bond yields. They estimated that the surge in corporate-debt sales — along with a rise in issuance of mortgage-backed securities — pushed up 10-year rates by about 0.3 percentage point this year.Related Articles:
- Costliest US Bond Sale Since ‘01 Is Investor Warning to Bessent — The US government sold $25bn in 30-year bonds at a 5.216% yield, the highest rate since 2001, as investors demanded greater compensation to finance a growing national deficit.
- U.S. Treasury Investors Are Long in AI — U.S. government debt acts as a leveraged bet on long-run productivity growth, because tax revenue rises automatically with faster growth while spending commitments stay flat. Each 0.1 percentage point increase in permanent productivity growth raises the fundamental value of government debt by $1.3tn, implying a 71 basis point decline in
- The Market Is Asking Questions — AI infrastructure debt spreads are widening as markets question whether returns on massive, front-loaded capital spending will outpace financing costs before assets depreciate. If compute demand plateaus from efficiency gains or slow adoption, the industry faces a glut of expensive, rapidly depreciating capacity.