AI Hardware Spending Surpasses U.S. Residential Investment

Spending on information-processing hardware, including data centers and computer equipment, has surpassed residential investment in the United States. Data from the Bureau of Economic Analysis shows that spending on information processing equipment reached 752 billion dollars in the second quarter, representing a 51% increase from an early 2021 peak.

This shift occurs as real private residential fixed investment fell 18% to 748 billion dollars, a decline driven by high mortgage rates and borrowing costs. In contrast, AI investment remains largely yield-agnostic. Treasury Secretary Scott Bessent noted that AI companies are issuing debt regardless of borrowing costs due to expected high returns.

The boom is led by hyperscalers, with S&P Global projecting that capital expenditures from Alphabet, Amazon, Microsoft, Meta, Oracle, and SpaceX will exceed 1.3 trillion dollars by 2027. However, S&P Global warns that this aggressive build-out could lead to overcapacity if future demand fails to meet expectations. The firm further noted that operating cash flow for these six major hyperscalers will likely be negative in 2026 and 2027.