Despite the Fed funds rate being at the highest level in decades, capex spending by the Magnificent Seven is at record-high levels. This highlights how mega-cap tech giants prioritize AI investments even amid high interest rates.
This is another reason why the monetary policy transmission mechanism is much weaker than usual. Fed hikes are having a much smaller negative impact than normal on business investment decisions because of the strong appetite among firms to invest in AI.
Hyperscalers' pockets are still deep enough for further spending, indicating that their substantial cash flow enables ongoing investments in AI technology despite any economic headwinds.
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