Insight Investment

“The extraordinary surge in AI-related investment, underpinned by record-high profit margins, should act as a meaningful tailwind for both US and global growth. Early signs of this impact are already visible: AI capex contributed approximately 0.5 percentage points to US GDP growth in the first half of 2025.”

In this note, we explore the evolving role of business investment – particularly the recent surge in AI-related capital expenditure – as a key driver of global growth. We examine the intrinsic links between economic growth, corporate profitability, and investment activity, using the lens of US exceptionalism.

Figure 1: The investment, profit and growth cycle link

Historically, the US has consistently out-invested its global peers, a trend that has underpinned superior profitability. Today, US profit margins are at 70-year highs, largely propelled by the extraordinary returns of a handful of mega-cap technology firms. These ‘hyperscalers’ are at the epicentre of what is fast becoming a powerful secular tailwind for global growth: the AI capex boom.

While many investment booms end in bust, the sustainability of this one hinges on whether new technologies can deliver meaningful productivity gains and justify the scale of investment. That question will only be answered over time.

In the near term, however, the key issue is whether the capex surge itself can offset headwinds from US tariff policy and a weakening labour market. Much of the investment is flowing into semiconductors and hardware, particularly data centres. Unlike traditional manufacturing or commercial construction, data centres require fewer labour hours per dollar spent due to automation and prefabrication. Power supply may emerge as a critical bottleneck, but also presents a compelling medium-term investment opportunity.

We also highlight the growing vulnerability of US households to increasingly concentrated equity market exposure, which raises the risk of a reversal in the wealth effect that has, until now, supported consumption.

Finally, we introduce a new cyclical growth indicator, constructed bottom-up from global sector PMIs. This tool aims to capture emerging secular trends and may serve as a valuable enhancement to our existing growth regime framework.

We explore this across four segments:

1. The historical link between investment, profitability, and growth cycles
2. The AI capex boom and its implications for global growth
3. Potential risks from an imbalanced economy
4. How we capture these dynamics in our regime framework