In short, the composition of business spending has undergone a quiet revolution. The term 'capex' used to conjure images of heavy machinery and equipment. That is being replaced with generative AI and software.
These shifting priorities to software over physical capital have weighed on purchases of equipment and dented overall manufacturing activity in recent years.
What was once an afterthought for businesses calibrating investment dollars has become the primary source of investment. Investment in 'intellectual property products' now makes up the biggest slice and accounts for nearly all the growth in the current cycle.
In the last five years, IPP spending jumped more than 30%, while equipment spending was essentially flat. The trend predates the artificial intelligence revolution.
#business-spending #investment-transformation #manufacturing-activity #intellectual-property #economic-indicators
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