AI infrastructure demand surges at 30-year growth pace
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U.S. businesses kept investing heavily in equipment in September, extending a stretch of strong demand for manufactured goods largely fueled by the AI infrastructure boom.
Zoom in: Demand for equipment associated with the AI boom has surged at a pace not seen in recent decades.
- Orders for computers and related products, such as servers, storage devices and peripherals, surged 27% from a year earlier — including a nearly 4% increase in September alone.
- For a faster annual pace of growth, you'd have to go back nearly 30 years to January 1997.
By the numbers: New orders for durable goods rose 1.8% in September, a sharp increase driven by commercial aircraft orders.
- Orders excluding transportation equipment rose 0.5%, as did core capital goods orders, a closely watched measure of business investment that extended a five-month streak of gains.
- Shipments of core capital goods, which feed into GDP estimates of business equipment investment, rose a robust 1.2%.
The intrigue: "[Tuesday's] report extends the pattern manufacturing has shown since the spring: Investment-led demand is running ahead of what factories can deliver," Richard de Chazal, macro analyst at William Blair, said in a note.
- He added that unfilled orders have risen every month for more than a year, suggesting manufacturers are struggling to keep pace with demand.
What to watch: Thursday's GDP report will show how much the surge in equipment spending contributed to third-quarter growth and whether rising capital goods imports offset that investment.
The bottom line: "The strong AI spending continues to drive business investment, and there are spillovers and strengthening [capital expenditures] outside of tech even amid higher borrowing rates and energy costs," Nationwide chief economist Kathy Bostjancic wrote in a note.
