- U.S. tech giants are directing record spending towards IT and Artificial Intelligence (AI), while traditional sectors see reduced investment.
- The “Magnificent 7” companies are forecast to collectively spend $650 billion on capital expenditure and research and development in 2024.
- Total corporate spending on IT equipment and software in the U.S. has risen to $1.45 trillion, making up 40% of private fixed investment.
- Private fixed investment for IT grew by 12.4% quarter-on-quarter, but non-IT investment fell by 4.9%, according to recent U.S. GDP data.
- Legislation and regulatory actions in recent years have provided favorable conditions for technology and cryptocurrency markets.
Alphabet, Amazon, Apple, Meta Platforms, Microsoft, NVIDIA, and Tesla—commonly known as the “Magnificent 7″—are set to invest a combined $650 billion in capital projects and research and development this year, according to data from Lloyds Bank. This surge in tech spending is happening even as U.S. policy efforts focus on boosting domestic manufacturing.
The Magnificent 7’s 2024 investment will be larger than the U.K. government’s yearly public investment, Lloyds Bank noted. Meanwhile, U.S. companies have increased their total spending on information technology (IT) and software to $1.45 trillion, representing a 13.6% increase from the previous year and more than 40% of all private fixed investment in the United States.
Private fixed investment in IT climbed by 12.4% in the second quarter of 2024 compared to the prior quarter, as reported by the Bureau of Economic Analysis. In contrast, investment in non-IT sectors declined by 4.9%, continuing a trend of contraction for three straight quarters.
Lloyds’ FX strategist Nicholas Kennedy attributed the trend to a “fear of missing out (FOMO)” on advances in artificial intelligence. “There is also a FOMO effect at work, firms encouraged to divert investment resources from what they traditionally do towards fashionable AI-related projects. So they’re just spending elsewhere,” Kennedy stated.
The transition from investing in physical assets (sometimes referred to as “bricks”) to digital and technology (“bits”) remains strong. This digital focus has given additional momentum to sectors like cryptocurrencies. Both Bitcoin and Nvidia have experienced significant growth since late 2022, in parallel with advancements in AI and the launch of ChatGPT. Recent regulatory developments have further supported the technology and crypto markets, with key U.S. legislation clarifying oversight for digital assets and making strategic appointments within financial regulatory bodies.
These trends highlight U.S. corporations’ increasing commitment to digital innovation, even as traditional capital investments lose ground.
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