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US Rates Strategy Daily August 26, 2026 Troy Ludtka, US Economics troy.ludtka@smbcnikko-si.com 1 212-224-5483 AI Buildout is Accelerating Core nondefense capital goods shipments grew at a robust 10.6% y/y rate in July, marking one of the strongest readings since the series began in 1992, exceeded only during February 1994- October 1997 (IT/fiber-optic buildout), January 2005-March 2006 (housing boom), August 2011- June 2012 (post-GFC recovery), and April 2021-February 2022 (post-COVID, V-shaped recovery). This series is among the purest signals indicating that the data center, AI ecosystem, and broader CapEx cycle is not only continuing but accelerating. While real equipment investment is also likely to continue accelerating, much of this spending is coming from imported goods; our team estimates that the current CapEx boom has contributed just 0.2 percentage points to quarterly GDP growth on average since March 2025, though it contributed 0.8 percentage points to Q2 GDP. As discussed yesterday, consumption is running above trend due to equity market wealth effects allowing households to draw down their savings rates to near-record lows. Please subscribe to our new research website for access to our content ( here ). Source: Census, BEA, Haver, SMBC Nikko -20 -10 0 10 20 30 -20 -10 0 10 20 30 2000 2005 2010 2015 2020 2025 Shipments: Nondefense Capital Goods ex Aircraft (%y/y) Real Capex Investment (%, y/y)
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AI analysis
AI-generated from the report above · not a translation and not the institution's wording · verify against the official source
Key arguments
- Core nondefense capital goods shipments grew 10.6% y/y in July, one of the strongest readings since 1992, indicating the data center/AI CapEx cycle is accelerating.
- Despite strong capital goods shipments, real equipment investment is likely to continue accelerating, but much of the spending is on imported goods, limiting domestic GDP impact.
- The current CapEx boom has contributed only 0.2 percentage points to quarterly GDP growth on average since March 2025, though it contributed 0.8 percentage points to Q2 GDP.
- Consumption is running above trend due to equity market wealth effects, allowing households to draw down savings rates to near-record lows.
Risks
- If the CapEx boom is heavily reliant on imports, it may not translate into sustained domestic growth, potentially leading to a trade deficit widening.
- The acceleration in AI buildout may face cyclical or supply-side constraints, which could temper the pace of investment.
- Equity market wealth effects supporting consumption could reverse if markets correct, dragging down consumption and overall growth.