Mag 7 Defies Trump’s Manufacturing Push With $650B Tech FOMO Frenzy
Silicon Valley's giants are doubling down—while DC plays catch-up.
The $650B Bet Against Beltway Politics
As the White House pushes 'Made in America,' tech's elite are funneling capital into AI, quantum, and blockchain at breakneck speed. Old economy? More like old news.
FOMO Meets Fiscal Firepower
The Mag 7's spending spree isn't just about innovation—it's a power move. With valuations stretched thinner than a metaverse avatar's patience, someone's banking on the greater fool theory.
One thing's clear: When tech titans zig, politicians zag. And Wall Street? Too busy counting commission fees to care.
FOMO and AI
According to Lloyds' FX Strategist Nicholas Kennedy, the decline in investments across other sectors of the economy could be due to several reasons, including the fear of missing out (FOMO) on the artificial intelligence (AI) boom.
"There might be some explanations other than a crowding out by IT spending and political/trade uncertainties that you could call on; the building boom that was triggered by Biden's CHIPS act, which boosted structures, has faded, for instance. 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 said in a note to clients.
The chart indicates that U.S. corporate spending on IT equipment and software has increased to $1.45 trillion, representing a 13.6% year-over-year rise. The tally makes up over 40% of the total U.S. private fixed investment.
The U.S. second-quarter GDP estimate, released by the Bureau of Economic Analysis early this week, showed that private fixed investment in IT increased by 12.4% quarter-on-quarter.
Meanwhile, investment in non-IT sectors or the broader economy fell by 4.9%, extending the three-quarter declining trend.
From 'bricks' to 'bits'
This continued dominance of "bits" spending in corporate America should calm the nerves of those worried that the administration's focus on manufacturing may suck capital away from technology markets, including emerging avenues like cryptocurrencies.
Bitcoin and NVDA, the bellwether for all things AI, both bottomed out in late November 2022 with the launch of ChatGPT and have since enjoyed incredible bull runs, demonstrating a powerful correlation between technology's rise and the crypto market.
"Whether that [AI spending boom] generates a return is another matter, but it does reshape plans towards bits from bricks," Kennedy said.
Moreover, the crypto market has also found a significant tailwind in the form of a favourable regulatory policy under Trump. The administration has demonstrated its pro-crypto bias through the signing of several key pieces of legislation aimed at clarifying regulatory oversight for digital assets and stablecoins, including measures that have garnered bipartisan support. Additionally, the administration has made strategic appointments to financial regulatory bodies.
