Chart of the Week - Tech Capex Crowd-Out
Chart in-focus from the latest Weekly S&P500 ChartStorm
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Capital Expenditure (aka capex) by tech and tech related companies now accounts for half of all S&P500 corporate capex.
Depending on your perspective, this is either the most bullish or bearish chart you’ve seen today!
The bulls will say this is a virtuous cycle of tech acceleration where more investment enables more breakthroughs, rapid rollout and scaling, which leads more revenues and favorable funding, which enables further investment (and so-on)
The bears will say this decadal-doubling is unsustainable and a classic bubble sign + late-cycle signal (there appear to be trends and cycles in this chart).
Meanwhile, economists might quip that it amounts to crowding out of investment that might have gone into industry, healthcare, and natural resources — which will come back to bite us later as flows funnel into AI and neglect real economy capacity building.
The pragmatic view is probably a bit of all of the above.
I would suggest this does look a bit overheated (and does represent a vulnerability), but also reflects the strong cyclical/thematic updrafts helping tech stocks drift higher for longer for now. It also helps explain why commodity prices are headed higher as commodity capex remains sluggish.
So it’s an important piece of the puzzle, and part of a very interesting theme I discussed in the latest Weekly S&P500 ChartStorm…
Bottom line: Tech capex has surged to 50% of all S&P 500 corporate capex.
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and Head of Research at Topdown Charts
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