UBS sees rising reliance on AI capex as a key growth risk

Investing.com -- The pickup in U.S. business investment and manufacturing is more dependent on the artificial intelligence boom than many investors realize, according to UBS in a note on Thursday.

UBS economist Jonathan Pingle said signs of broader growth have emerged this year.

“The broadening theme has taken hold, most clearly in the orders and shipments data, and we periodically hear phrases like ‘manufacturing renaissance,’” wrote Pingle.

However, he added much of that strength traces back to AI. "The powerful tailwind of the AI buildout is like a rising tide lifting all boats," he wrote.

Traditional industrial firms are seeing more demand because of the AI buildout. Pingle explains that GE Vernova makes gas turbines that power data centers, and Caterpillar has reported strong generator sales. Demand has also spread to inputs such as steel, machinery, wiring and cable.

As a result, UBS said this suggests the rest of the economy would be weaker without AI spending.

"The expansion is more reliant on the AI/tech capex buildout than ever, it looks like, which has implications for growth, risks and monetary policy," Pingle wrote.

“GDP growth, business investment and inventories are being broadly supported by the direct and indirect demand stemming from the AI buildout,” he added. “The singular nature of the driving shock, AI, is both unusual and exceptional at the moment.”

You May Also Be Interested In

• US Treasury: 'Authorizing Wind Down Activities...the Offloading of Cargo Involving Certain Persons or Vessels Blocked on October 21, 2026'
• Unicycive stock jumps as FDA accepts OLC drug resubmission
• Advisory firm lobbies SEC to end shareholder anonymity, eyes January push