American Businesses Just Unleashed the Biggest Investment Boom in 15 Years — and AI Is Driving It
Factory shipments just hit a record, and a handful of tech buyers are carrying much of the load. Power limits, angry voters, and jittery investors threaten the spree, and two numbers will reveal whether it survives 2027.
This post may contain links from our sponsors and affiliates, and Flywheel Publishing may receive compensation for actions taken through them.
American factories shipped a record $86 billion of core capital goods in September, according to The Kobeissi Letter. Core capital goods are the machinery, computers and equipment companies buy so they can expand, and the measure leaves out defense hardware and aircraft. Shipments rose 11.6% from a year earlier, the fastest annual growth since July 2021. Over the past three months they climbed at a 16.5% annualized pace, the quickest since 2011 if you set aside the pandemic rebound.
Most of that comes from one place. Orders for computers, servers, storage devices and related equipment jumped 27% year over year, the strongest gain since January 1997, when the dot-com expansion was picking up speed. That comparison matters. The boom is real, but it rests on a small group of buyers whose spending now holds up a large share of U.S. growth.
How AI Spending Became the Economy’s Growth Engine
The government’s broader numbers show the same shift. Real gross domestic product grew at a 3.4% annualized rate in the third quarter. Gross private investment rose 19.4%, its biggest jump since early 2025. Private nonresidential fixed investment, which tracks business spending on structures, equipment and software, reached a record annual rate of $4.95 trillion, up 12.1% from a year earlier.
Companies have the cash to pay for it. Corporate profits ran at a $4.7 trillion annual rate in the second quarter, up 20.8% year over year. Hyperscalers are expected to spend $845 billion on data centers this year and close to $1.4 trillion in 2027, according to estimates discussed on 24/7 Wall St.’s AI Investor Podcast.
Equipment makers can’t build fast enough. Unfilled orders have grown for more than a year, which means demand is running ahead of production. That backlog can keep the cycle going for electrical, cooling and networking suppliers well outside Silicon Valley (we covered seven of these non-chip AI infrastructure names, from power to cooling, in a free report you can grab here). Some of the benefit flows abroad, though. Imports rose 19.7% in the third quarter while exports fell 5.7%. Every imported server rack subtracts from the domestic GDP gain.
Warning Signs Investors Can’t Ignore
Investors are getting nervous. Tech stocks just suffered their biggest selloff since Covid on fears that the data center boom could end early, Fortune reported. Morningstar warned that hyperscalers’ AI investment will outpace near-term earnings.
Local voters are pushing back too. In the midterms, voters approved restrictions in nearly every data center ballot measure, with one notable exception in Hardwood, North Dakota. Power is the other limit. The Energy Department projects data centers could use up to 12% of U.S. electricity by 2028, and retail electricity prices have risen faster than inflation since 2022.
The boom has one weak point. AI companies could cut back because returns disappoint, borrowing gets more expensive or computing capacity exceeds demand. If they do, equipment orders could fall quickly, and the spending that is supporting growth today could become an economic drag.
Signals That Will Decide 2027
Two numbers matter most. The first is unfilled orders in the next durable goods reports. A shrinking backlog would be the earliest sign that buyers are pulling back. The second is the capital spending guidance the largest cloud companies give in their fourth-quarter earnings reports early next year. Higher budgets would mean the cycle has room to run. If they hold budgets flat while fighting local opposition and power shortages, the record factory shipments of September may turn out to be the high point.
Contact [email protected] for any questions or corrections.
After two decades of patrolling the dark corners of suburbia as a police officer, Rich Duprey hung up his badge and gun to begin writing full time about stocks and investing. For the past 20 years, he’s been cruising the markets looking for companies to lock up as long-term holdings in a portfolio while writing extensively on the broad sectors of consumer goods, technology, and industrials. Because his experience isn’t from the typical financial analyst track, Rich is able to break down complex topics into understandable and useful action points for the average investor. His writings have appeared on The Motley Fool, InvestorPlace, Yahoo! Finance, Money Morning, and, of course, 24/7 Wall St. He has been featured in both U.S. and international publications, including MarketWatch, Financial Times, Forbes, Fast Company, and USA Today.
