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The Other US Capex Question

Tan Kai Xian Gavekal

Date Posted:: May 21, 2026

US non-residential fixed investment grew +5.8% Y/Y in Q1 2026, driven by AI-related spending, while non-AI capex was minimal. Gavekal does not see crowding out from AI or deficits. Returns on capital > borrowing costs by several pp, and firms sit on trillions in cash.

Outside AI, business capex was anemic, contributing just 1.54% to total capex growth—a share that has barely been exceeded for the last two years. While investment is clearly attracting a lot of financial and real resources, the crowding-out thesis does not stand up well to scrutiny. If the demand for capital generated by AI investment were really pricing other projects out of the market, then the real cost of borrowed capital would have increased materially. That is what happened in the tech boom of the late 1990s. But this time around, the “Wicksellian spread” between return on capital and cost of capital has remained positive. The US corporate sector has abundant internally generated funds for capex. The US nonfinancial corporate financing gap—the difference between capex and gross savings—is negative. This suggests that businesses are not investing beyond their means, and therefore are not forced to pick and choose between investment opportunities. US businesses have enough financial capacity to invest both in AI and non-AI projects. The tightening of immigration policy under Donald Trump has brought US labor force growth (and population growth) almost to a standstill. This implies slower consumer demand growth and less incentive for business capex.

Takeaways by Macro Roundup^® AI

The Wicksellian spread between return on capital and cost of capital remains positive, contrasting with the late 1990s tech boom.

Moonshot Capitalism: AI Rewrites The Venture Capital Playbook

Tim Bradshaw Financial Times

Date Posted:: September 10, 2026
Is Database:: Database

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.

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.

Gross and Net US Investment

Timothy Taylor Conversable Economist

Date Posted:: September 4, 2026
Is Database:: Database

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.

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.

Understanding AI and Productivity

Chad Syverson Economic Innovation Group

Date Posted:: August 28, 2026
Is Database:: Database

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.

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.

US Widens AI-Driven Investment Gap With Europe

Sam Fleming, Amy Borrett and Olaf Storbeck Financial Times

Date Posted:: August 24, 2026
Is Database:: Database

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.”

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.

Why Big Tech’s AI Spending Is $3 Trillion Higher Than It Seems

Peter Rudegeair and Peter Santilli Wall Street Journal

Date Posted:: August 17, 2026
Is Database:: Database

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.

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.

AI Is Driving Up Treasury Yields: ‘It Just Touches Everything’

Davide Barbuscia, Ye Xie, and Michael MacKenzie Bloomberg

Date Posted:: August 17, 2026
Is Database:: Database

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.

[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.

US non-residential fixed investment grew +5.8% Y/Y in Q1 2026, driven by AI-related spending, while non-AI capex was minimal. Gavekal does not see crowding out from AI or deficits. Returns on capital > borrowing costs by several pp, and firms sit on trillions in cash.

Is weak business investment driven by labor supply rather than AI competition?

Takeaways by Macro Roundup® AI

Related Articles:

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?

Takeaways by Macro Roundup® AI

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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?

Takeaways by Macro Roundup® AI

Related Articles:

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?

Takeaways by Macro Roundup® AI

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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?

Takeaways by Macro Roundup® AI

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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?

Related Articles:

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?

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Takeaways by Macro Roundup^® AI

Takeaways by Macro Roundup^® AI

Takeaways by Macro Roundup^® AI

Takeaways by Macro Roundup^® AI

Takeaways by Macro Roundup^® AI