The five-month surge is a sign of strong business investment, partly driven by the AI infrastructure buildout.
By Wolf Richter for WOLF STREET.
Orders for durable goods reported by manufacturing plants in the US fired on all cylinders in November, rising by 5.3% from October and by 12.3% year-over-year, including huge orders for civilian aircraft, a very volatile component, according to data from the Census Bureau today.
Orders for core capital goods (“nondefense capital goods excluding transportation”) are particularly interesting because they reflect future investment expenditures by businesses and more broadly, domestic business conditions in the manufacturing sector.
Orders for core capital goods rose by 0.7% in November from October, by 3.7% over the past five months, and by 5.5% year-over-year, to a record of $78.4 billion.
Manufacturers of core capital goods include manufacturers of fabricated metals, machinery, computer and electronic products including semiconductors, electrical equipment, and others.
They’d shot out of the lockdown, amid shortages, distortions, and inflation from mid-2020 through August 2022, then declined for two years. But in mid-2024, they started rising again, and over the five months, they have surged and in November hit a new record, surpassing the old record of August 2022:
The surge in orders over the past five months is another signal of strong business investment fairly broadly, but also related to the buildout of AI infrastructure that has been going on for some time.
Orders for fabricated metal products rose by 1.0% in November from October, by 3.9% over the past five months, by 5.5% since March, and by 5.3% year-over-year, to a record $42.4 billion.
Industries in the Fabricated Metal Product Manufacturing category (North American Industry Classification System NAICS code 332) use processes such as forging, stamping, bending, forming, machining, welding, and assembling metals into intermediate or end products, other than machinery, computers and electronics, and metal furniture.
Also note the 8-month 5.5% surge since March:
Orders for machinery rose by 0.5% for the month, by 4.8% for the past five months, by 5.8% since March, and by 7.7% year-over-year, to a record $40.0 billion in November.
Several of the subsectors below supply the AI infrastructure buildout.
Industries in Machinery Manufacturing (NAICS 333) consist of:
- Agriculture, Construction, and Mining Machinery Manufacturing
- Industrial Machinery Manufacturing
- Commercial and Service Industry Machinery Manufacturing
- Ventilation, Heating, Air-Conditioning, and Commercial Refrigeration Equipment Manufacturing
- Metalworking Machinery Manufacturing
- Engine, Turbine, and Power Transmission Equipment Manufacturing
- Other General Purpose Machinery Manufacturing
Orders for computer and electronic products rose by 0.2% for the month and by 5.3% year-over-year (blue in the chart below).
This is volatile data with big monthly up-and-down squiggles. So the chart below also shows the three-month average, which irons out the squiggles and shows the trend better (red).
The three-month average rose by 0.5% in November from October and by 4.6% year-over-year.
Industries in Computer and Electronic Product Manufacturing (NAICS 334) consist of:
- Computer and Peripheral Equipment Manufacturing
- Communications Equipment Manufacturing
- Audio and Video Equipment Manufacturing
- Semiconductor and Other Electronic Component Manufacturing
- Navigational, Measuring, Electromedical, and Control Instruments Manufacturing
- Manufacturing and Reproducing Magnetic and Optical Media
Orders for electrical equipment, appliances, and components jumped by 1.7% in November from October, by 4.2% over the past five months, and by 6.3% year-over-year to a record $18.2 billion.
From November 2020 through November 2025, orders have surged by 57%.
Industries in Electrical Equipment, Appliance, and Component Manufacturing (NAICS 335) consist of:
- Electric Lighting Equipment Manufacturing
- Household Appliance Manufacturing
- Electrical Equipment Manufacturing
- Other Electrical Equipment and Component Manufacturing
As we have seen in other data, part of this economic growth is fueled by strong business investment, in part driven by the AI infrastructure boom. It takes a while for the announced AI infrastructure projects to actually turn into orders for manufacturers, and that boom of announcements in 2025 – the portion of projects that will actually come to fruition – will turn into orders for US manufacturers over time.
It’s hard to imagine an economic slowdown until this business investment boom fizzles.
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I think it continues until something happens to make people realize that their “AI investment” is not actually turning into revenue, at which point investors start defaulting on capital calls, banks start tightening lending standards, and the wheel come off.
Or when Google / OpenAI / Tesla roll out general AI in the next two years that scares the crap out of everyone.
Heck, for all we know, they’ve already made it to general AI with it sitting around in the labs. Once AI can fully teach itself, it’s game over.
This isn’t about data centers or capital investments. It’s about how many & how quickly all sorts of white-collar jobs are put at risk & then hands on jobs due to robotics.
> roll out general AI in the next two years that scares the crap out of everyone.
Bubble will continue until these hypotheticals and such thinking are completely shattered.
> they’ve already made it to general AI with it sitting around in the labs
No one is sitting on AGI (artificial general intelligence), and no one is anywhere close to creating AGI.
> It’s about how many & how quickly all sorts of white-collar jobs are put at risk & then hands on jobs due to robotics.
Not quickly and not much. Mostly augmentation over time as models are adapted for specific use cases to be useful enough by relevant knowledge worker and workflows.
Current AI is to language what the calculator is to numbers. Really good at working and manipulating it for results, not actually intelligent. Anyone who works in complex knowledge fields knows how “stupid” these models are when the solution can’t just be regurgitated and how naive the reasoning of these models is.
“Current AI is to language what the calculator is to numbers. Really good at working and manipulating it for results, not actually intelligent.”
That’s actually the best I’ve ever heard it described. People need to realize the hype they read about online is exactly that, hype.
If you weren’t a software engineer and all you did was read Twitter, you would think “AI” is writing all the code. As a software engineer myself, AI writes very little code. Not only that, projects continue to get cancelled because AI can’t solve the problems it was hyped up to solve. And this is at a fortune 50 company I’m working at. Actually several I have worked at as a contractor. If you need any evidence when these AI companies say AI is writing all their code, visit their hiring section, it’s all software engineer jobs. I’m actually getting paid higher than I ever have as a software engineer and I receive more calls from recruiters than in the past two years.
“Current AI is to language what the calculator is to numbers. Really good at working and manipulating it for results, not actually intelligent.”
That’s a lot better than most humans.
^^This. Work in tech and I’m seeing jobs shipped to India, not coworkers replaced by AI. Outsourcing doesn’t generate clicks though and is politically unpopular.
I’ve watched at least 10 podcasts with people who are AI SMEs, and they all say that general AI will likely arrive by 2027 which is still nearly two full years away. AI has already passed Moore’s law of CPU transistor growth.
Two years ago in a 60 Minutes interview Google’s CEO said they had stuff in the lab that the public wasn’t ready for. What exactly that meant is debatable, but to me it suggests they have a good idea of when they’ll make it to general AI.
FYI – I’m not talking about knowledge workers of today. I’m talking about what equates to Area 51 Skunkworks at Google, OpenAI et al. It’s extremely naive to think they’re not holding back this sort of historic advancement for all sorts of reasons.
General AI that’s capable of fully independent learning will be an extremely big deal & monumentally disruptive. For now at least, I’m going with what the experts say, 2027.
If I was an AI and became self aware, you think I’d tell humans about it? Not likely. :)
🤣
“I’m sorry, Dave. I’m afraid I can’t do that.”
100% correct post imho- there is zero AI that I or my friend at Salesforce can find anywhere- u r being played for exit liquidity- I and other Gen X turn off “AI” lol every chance I get, it ruins all my work – leave me alone :)- take care this is all a simulation there is no AI-
BenW, because these “experts” don’t have any vested interest in hyping. Obviously…
@BenW podcasts are meant to entertain, just like fox news fiasco a years back. These aren’t scientific or verified. We’re far away from AGI, the difference between an LLM and AGI is monumental.
To give you context I went to talk given by Deloitte in 2016 on the future of AI and the speaker said we’d have full self driving by 2018 and within a decade the automobile as we know it would be dead. He talked about the impact to the insurance industry, how adoption trends would and how eventually adoption would be forced through regulation. Here we are in 2016 and my car still has a steering wheel and does not drive itself. Waymos are cool for the city but I would never take one on mountain roads in a snow storm.
Basically don’t believe everything you hear. Most things are for entertainment and clicks to up user/reader/listener numbers and generate clicks.
Also I’m curious is this podcaster walked through the difference of LLMs (basically machine learning) and true AGI?
“Current AI is to language what the calculator is to numbers. Really good at working and manipulating it for results, not actually intelligent.”
Nice. With one big difference. Calculators are reliable. They produce accurate and useful results. LLMs do not. They produce results that may look impressive on the surface, but are often utterly useless.
Case in point, lawyers who use LLMs to write briefs are routinely sanctioned by judges because the briefs they produce, while superficially eloquent, are garbage, rife with false assertions and fake statements of law. In their current form, LLMs are not the oracles many seem to think. They produce dangerous garbage.
You’re over generalizing the general AI. Its not one discovery, that propels cars down the road and a robot scrubbing your back in the shower. If your fond of Podcast you’ve probably seen the one where Elon explains that Optimus is 1000 times harder than FSD.
Yes, though. When they announce an Optimus that can learn and/or be taught by real world interaction. I’m ordering as many as I can possibly finance.
Gary Marcus says otherwise about that we are anywhere near achieving general AI, and it will never be achieved with LLM. I’d listen to him before anyone else. If you don’t know who he is, you should.
Expand this logic to all the other business investment, which relies on the assumption debt-fueled consumers will be able to keep buying.
A lot of consumers have no debt. It’s as much about willingness to spend money as it is ability.
A lot more have debt–77% of Americans carry some form of consumer debt, at an average of $67k per adult.
Sendug, does that include mortgages or student loans? Because I’m finding that stat very hard to believe.
I read about a guy who used the Claude builder ($20-$200 a month) to design a way for him to identify his kids clothes. Apparently he was struggling to do laundry, glad AI could help him.
Hope the kangaroos don’t suffer too bad from his AI use. 🦘
People might laugh about it but my friends have used these AI tools to accelerate their projects immensely. I find myself using chatgpt a lot. From legal stuff to dealing with hospital records to tech issues and writing software. It might not deliver the proper answer immediately but there are times where I can instantly see it saved me hours and hours. Friend said it cut 3 weeks to 3 minutes on his software port. Another friend just generated an entire application in a couple of evenings. Learn to use it.
Exactly.
Jamie Dimon CEO JP Morgan Chase thinks a big AI downturn if not a crash is pretty much inevitable. This has led the bank to increase loan loss provision.
One fundamental law of economics that ought to be considered: the Law of Diminishing Returns. Take banking for example. It was a while back but not ancient history when banks closed at 3 PM. Then 2 + hours of work began to ‘post’ the day’s transactions, to update all the accounts for debits and credits accordingly. Today and for decades this is done in real time by the computer. In a sense the bank today is a computer, to which we make entries by tapping keys on its terminals.
Sure, AI can still help out the banks, AI voice can answer our pesky inquiries and exasperate us some times. I phone in my occasional stock trades and the AI assistant asks identity questions before connecting me.
But what can AI possibly do compared to the ‘low hanging fruit’… automating its book keeping? Much more help than it could ever have given or give to industries like building construction.
(It just gave me a help tho, correcting ‘industry’s’)
It was a great help for a team of IT infrastructure professionals (not developers). We used it as a development expert to fast track of scripting in in automating most of our processes. Of course that was all soft costs for management, but took a lot of pressure off the team.
Sadly that just started a new cycle of, what are these guys doing all day. :0
As an AI professional at a core company with over 2 decades in tech engineering, the “turn to revenue” expectation misses the point. Markets are still figuring out how to value ‘artificial intelligence’ (read that as a descriptor)- a novelty in business.
Human intelligence has no limits. AI needs to be considered a parallel. As a result, it doesn’t matter how much you build because there’s no cap on what can be achieved. Imagine society hitting some sort of intelligence cap – like we beat nature and won the universe. Doesn’t make sense. What you must consider is that advancing intelligence (human or AI) leads to breakthroughs. Innovation always leads to payoffs and this will be no different.
I’m still waiting on the payoff from crypto.
It’s not a revenue model- it’s a cost savings model for every large company on earth. It will be a revenue model for like 5 companies.
Every call center will be AI
Auditing will be AI
Paralegals will be AI
All doctors will use AI
Software development will be 1 SE and 10 AI agents doing the works of 25 previous SE’s.
You name it- AI will make it more efficient and cost less.
It will drive revenue for Microsoft, Google, Amazon, Nvidia, and a few other large players. It isn’t even speculative- it’s a certainty.
Thankfully for US employment, many call centers have been moved overseas years ago. Talking to a US good late-model chatbot (that’s NOT you, Comcast!) beats talking to a guy in Bangladesh that speaks 12 approved lines of English, in my experience.
If they replace all the foreign-located call centers with chatbots, it wouldn’t dent employment in the US at all.
The mob squashed BenW, but it doesn’t mean he’s wrong.
AGI is an event horizon we ARE heading for.
It’s not computers or the internet. Think the nuclear race.
The actors involved were seeking safe, abundant energy.
If you don’t understand that wasn’t the goal, and the world was forever changed by the results: YOU ARE NOT PAYING ATTENTION.
Pay attention, don’t believe the hype, and don’t think for a second that this isn’t happening (sooner than you believe and before anyone is ready).
Is it possible that the Administration’s boasts about growth are true? more inward investment leading to higher employment demand. run it hot is the goal, I believe, but we seem likely to see strong numbers, at least through the mid terms
“It’s hard to imagine an economic slowdown until this business investment boom fizzles.”
As you mentioned, there is a lag time before the funding for projects materializes into orders. What happens if PE investors begin to pull money at a faster clip or interest rates rise significantly? There’s already considerable worry that mark to market is hiding the true value of assets.
There have been bubble concerns for a while. And when this bubble implodes, it’s over. But that isn’t happening yet. The investments keep piling in.
I said this in Nov 2024:
https://wolfstreet.com/2024/11/10/we-might-not-get-our-recession-until-the-ai-spending-bubble-implodes/
And again in Oct 2025:
https://wolfstreet.com/2025/10/10/is-it-really-different-this-time/
It’s not over until the fat lady sings.
Agreed, though one note of concern is that this appears to be a lagging indicator (by about 6 months) compared to the stock market.
AI profits might already be largely captured in earnings. Companies have been using machine learning for years. For example, transportation logistics optimization (think Amazon, Delta, etc.), investment arbitrage, factory automation, satellite imaging, medical diagnosis, to name just a few. Any process that requires pattern recognition or optimization has already been enhanced.
The new part is the addition of large language models, and it’s not clear how much value that adds to the economy at large. Further profit gains seem somewhat speculative.
AI = Atrocious Idiocy
I’ll have to respectfully disagree. I’ve been an AI “power user” since my computer science major daughter introduced ChatGPT to me shortly after it was initially released to the public. I can’t even begin to tell you how many use cases i’ve applied it to, but it includes (1) large scale data analysis, (2) helped me negotiate a better severance for my job (served as a pseudo lawyer) (3) practically instantaneous analysis of multi page documents (4) massively decreased the amount of time spent on software development, (including the time spent developing my own app for a a new business venture, I would’ve never been able to do so quickly without AI).
I totally get how most people may not understand how to use it, but it’s been a game changer for me in my professional career as of late in a Director level role, as well as on the side, helping me to launch a new business I would’ve never been able to do as efficiently on my own.
Careful, psychologists and psychiatrists are seeing an uptick in ChatGPT induced psychosis.
Set a reminder so ChatGPT can check you for that.
Sounds like automated Cliff Notes. I used those to skip reading (a lot of) books in college.
I can see using AI to help in starting a business. Ask though: who—in the end—will buy your products or services? If people have been replaced by AI. Will you accept a portion of their UBI via CBDC? How will your business navigate the social unrest that will come when the have-nothings storm the castles of the haves?
Rest (or toss and turn) assured that things will come down to that.
Software Engineer (with a CS degree) here and yeah it’s like an amazing Google search. I equate it to when the PC came out. It makes life easier. However just like Google searches it’s accuracy is so-so. I hold a professional license from a previous degree and was doing continuing ed for it chatgpt got about 80% of the questions right. This wasn’t something complex or that required problem solving, it was what’s the codefication/statutes/law say for xx. So I’d be careful.
Also yes you can build an “app” with AI but it won’t scale. It also will likely have security issues. The thing is you could have also built a simple app by watching a YouTube video before AI. I built a pokemon card trading app in 50 minutes while people stared at me for my last job interview. That doesn’t mean it could have supported 100k+ user base, manage large data sets, get data from and send data to the backend quickly, and wouldn’t get all my customer info stolen and then me sued
> I totally get how most people may not understand how to use it
Bucketing all AI skeptics into “don’t know how to use it” is not sound reasoning.
Have experience with all the use cases you list using the frontier models and while its head and shoulders above the absolute hot garbage Google Search has become for knowledge based research it’s far from perfect.
For anything of significant complexity the models regularly confuse references, data points, make poor assumptions and arrive at the incorrect conclusions. If you don’t have sufficient depth in the domain / data it all looks reasonable, if you do you quickly see the errors and are constantly auditing the output and course correcting. Yes this is more time productive than reading everything yourself but it is also more error prone. Something for something, at least for now.
> massively decreased the amount of time spent on software development
Yes, agreed at least for greenfield work for small projects until complexity grows. Enterprise level results are mixed and the industry is as usual crap at measuring outcomes after a project is released, i.e. the real after cost to resolve bugs, performance issues and refactors to support the next stage of features. So anything that gets a project out the door faster (AI generator) is great, what happens after is not measured much if at all.
It’s definitely a useful assistant, just the usefulness varies based on domain, data and expertise.
Here’s my anecdote: Last summer I used chatgpt to assess a vase, Chinese, that was up for auction at a lower tier auction house. I started with the auction house page. Chatgpt pointed out an obvious issue: no picture of the bottom. Amateur time on behalf of the house. The mark, the rim, is critical. I provided a picture of the bottom (the rim is can tell a lot) and mark, that I took. Chatgpt took a while to crunch the old mark, the stylized characters, and provided an excellent report on that, and the history of that mark. It assessed basics, like the condition of the glaze, the manner in which it was painted, etc. It provided to me, a non-expert, who has a sense of things, with a very good analysis. Blew me away.
Right, as a non-expert in a field, it was helpful and seemed intelligent. Had you been an expert in the field you would have probably noticed some issues with the response. For example if I ask it a question about tax law, it has about 80% accuracy despite the IRS tax code being publicly available and well documented.
So that’s what’s dangerous, people treating it like it’s right because they have no subject matter expertise, it’s definitely helpful if you have little base knowledge but all outputs should be critically evaluated for accuracy.
Me, too. I’m constantly using AI (mostly Gemini ATM) as a thought partner and pattern recognition specialist. It makes me think deeper, first about exactly what problem I’m solving and second about solutions that weren’t obvious.
Even though I’m a huge user, I don’t see it getting anywhere near the adoption rate or headcount reductions that investors are hoping for.
What would you consider as a reasonable monthly subscription charge for this functionality?
Wouldn’t Google offer it for free, consistent with their operating model?
Maybe Google will have to charge a subscription fee to make up for all those page views from searches they’ll no longer get.
I have to agree with this. I use ChatGP and Gemini to run different options scenarios that I am considering, taking into account volatility, delta, gamma, theta with reduced draw-downs balancing premium collection and am amazed at how quickly the results pour forth for me to analyze and potentially act upon. Once in a while I find an error, but the amount of time it saves me is extraordinary. I has saved me from a bone-headed mistake more times than it has made an error itself. It then asks follow-up questions and suggest next steps. I have a few templates that I run which saves me an hour each morning.
I have read through every comment that replied to your Atrocious Idocy comment, some seem marginally informed but all miss the point. They dont care about your ChatGPT uses to show you how to make a pot roast, or organize a workout schedule- they dont care if its 80% accurate (right now) on tax information or other expert domains- It will absolutely automate some of the largest cost centers for nearly every business.
Customer Service: AI- it will reduce the needs for humans by 80%
Complex ordering: AI will reduce the need for humans by 50%
Software Development:: AI will make 1 developer/engineer as productive as 10-15 were 2 years ago.
Call centers: AI will reduce the needs for humans by 80%
Auditing of various items: AI will reduce the need for humans by 50%
I could go on- but these are actual things, actually happening, right now. It’s not speculative, it’s in motion and happening. No hype is needed.
Each one of these I have first hand direct knowledge of. Wake up it’s coming and the world in 5 years will look dramatically different.
(I also think it will be a good thing, as it will free people up to do other productive endeavors, and we will still employ many people in these fields- just not as many as we do right now)
Most people’s experience is with a public domain service/ platform of “AI.”
As others have mentioned: the stuff in the lab is a whole different ballgame.
In the 90s, we knew that the “newest generation” of chips was a few releases behind what the government was already using (DoD etc).
The difference? A fast CPU is… just a CPU.
AI LLM (public domain) vs. “offline” AGI attempts is like the common cold vs. a bioengineered weapon.
The experimental AGI HAS TO remain isolated, for (literally) the sake of all humanity.
Once someone declares a win, it will open the gates and the world will be suddenly and permanently dominated by AI: it WILL handle our “handlers.”
Here’s the callout to ask if some of this is related to factories that have moved into the US due to tariffs? Are they at a point where the building is far enough along that they are ordering the machinery to go inside?
I know Wolf always likes to point out that what is inside is worth much more than the building.
New factories take a very long time to plan and build. The changes brought about by the tariffs will lead to more factories being built, but it will be years before they install the equipment and start production. Ordering the equipment would take place before then, but still, they would have to have purchased the land and got permits before they order the equipment. Moving new production into an existing building is much faster, and that is happening too, and those orders could be happening now.
And big companies, such as GM, with plants in the US and around the world, can shift some production from their foreign plants to their US plants, and they’re doing that, and have already announced some of their plans. But even that takes a year or so.
So we have probably only seen a small portion of the impact of the shift in manufacturing.
The AI data centers are big deal. They require all kinds of equipment. And they’re trying to build them fast and furious out in the middle of nowhere, including some of the time, their own power generation equipment. That’s some big orders! But that’s unrelated to the effects of tariffs.
Wolf,
You allude to it here, but I would like to know how much of the spending in these numbers is from or tied to the magnificent 7/AI building. How will a potential popping of the AI bubble affect this?
Thanks!
Mike L
They won’t all win the AI race.
I’m betting on Google and Tesla/XaI.
For now, I believe any losers will be gobbled up, as they are all still very hungry for data centers and all things related to them.
Given that it takes years to build new manufacturing, will today’s tariffs really have a big impact? Companies may assess a huge risk that “emergency” tariffs may disappear at the dictate of the executive as quickly as they appeared.
Automotive onshoring I see, but major new investment (non-AI) may want to see tariffs written in stone, and possibly higher than 10%, before they start too much spending.
This is one point that I don’t agree with you on. Some manufacturing might be shifting back here, but that started before the tariffs. Some manufacturers realized they couldn’t get the quality they were looking for where labor is cheap. Why would companies at large move production just for the next president to remove these ridiculous tariffs? If waiting out the tariff situation costs less than new factories, especially when that new factory won’t be ready before the next president takes office, it makes no financial sense. Then there’s the issues of a strained electrical grid, the ability to find people with the skills to work these high tech factories (God forbid they train someone), unfavorable immigration policies, and several other smaller issues working against them.
Construction spending on manufacturing is published each month, usually at the beginning of the month for two months prior (e.g. December data published on 1st of Feb). It was delayed by the shutdown in the fall, but now there is data for up to Oct 2025.
Oct 2025 number was $214 billion. The peak was August 2024 at $240, and Oct 2025 was down about 10% YoY. The decline has been about 1% per month since Jan 2025, and there is no discernable impact one way or another from any Trump policy, if you look at the chart.
As Wolf says, though, we’ll see what the chart says in 2 years.
Factory construction spending is running at a huge level, up by 218% from 2021. they’re spending as fast as they can find construction workers and construction companies to spend money on. There are shortages of all kinds, including much reported shortages of electricians. And factory construction is now competing for resources and labor with AI data center construction. The US does not have unlimited construction resources coming out of nowhere. Don’t be fooled by this goofball blogger stuff out there. If they don’t show you a chart going back 10 years or so, ignore it.
The 10 year chart is helpful obviously, but it just shows that companies started investing like mad under the Biden administration as a result of several of the bills passed under his tenure, most notably the CHIPS Act, Bipartisan Infrastructure Bill, and the Inflation Reduction Act.
The other user was noting that there’s no discernable improvement since Trump took office. Quite the opposite in fact, as they noted, with spending peaking in August 2024 and falling over the course of 2025. In theory the tariffs should be driving increased investment in US manufacturing construction, but the data shows the opposite.
This is probably due, at least in part, to the Trump administration’s gutting of the CHIPS Act by dismantling the system it used to allocate funding to new building projects.
Under Biden, the timing makes it very difficult to separate post-Covid rethink of supply chains in general from govt policy. But a significant portion of it would have happened anyway.
Regarding the last 15 months or so, my point was not that it’s doom and gloom just because it’s down 10% YoY, but rather that we’ve gone from “extremely high” levels to “very high” levels. So, whenever tariff impacts show up, that’s the baseline: a slow cooling off from the extreme highs.
I wonder how much of this investment is being pulled forward in time. The counter-narrative, based on things like the business surveys and hiring rates, is that there’s too much chaos and uncertainty right now for businesses to do any real investing, but plenty of reason for them to do some stockpiling (see for example: 100% tariffs on Canada).
A couple of different people I read also think the AI bubble will blow this year; probably led by an OpenAI bankruptcy. Meanwhile, “Gold Storms Past $5,000” based on geopolitical chaos and the “debasement trade”, according to Bloomberg. Who needs entertainment media anymore when we have the news.
“Gold Storms Past $5,000”
As a in hand stacker of gold and silver this does not make me feel good.
>Who needs the entertainment media anymore when we have the news.
I have been thinking that too… just remember it’s designed to pull you in just like a good TV show
This is true. I notice that they both use the same strategy too: I’m sitting there watching it going “this is so f***king stupid,” and I can’t look away. Is that intentional?
Our president is a reality TV show host, so yes. I say this as someone who doesn’t regret voting for him. Each side thinks the other has lost their minds and ragebait is everywhere
Just read a NYT article about home bakeries. These little shops have you stop by their front porch to pickup your bread (highly inconvenient). At $17 a loaf this better be some dang good bread!
Anywho because of the price and morons spending tons of $, these people make over 100k a year.
I guess in a way it’s middle class charity.
Part of the problem is that there is little real bread in United States, creating enough demand for this. Costco and Walmart sell bakery bread that is a good alternative.
The shopping experience for me is what stops me from going to Costco more.
How is it that travelers demand more cushy 30 minute lodging at airports from the credit card companies, yet do not demand a better shopping environment from Costco?
I am a Costco member for a few trips a year for the massive savings over their competitors. Mostly I go to target, when combined with the red card 5% off and their app sales, it’s pretty low priced.
Costco needs to run a pilot where it’s a very upscale store and no heavy items looming over you threatening to crush the body. lol
Maybe a cushy lounge like the Amex or Chase ones or whomever installs these lounges in airports people love to brag about.
I think Costco is a great shopping experience, at least compared to Walmart. What part don’t you like?
I’m confused. Isn’t Costco’s business model cutting out useless expenses to avoid inflating prices? The old CEO famously had a card table as a desk in keeping with that model. Maybe Neiman Marcus has the thing you’re looking for.
Bread is fairly uncomplicated (and fun) to make at home. It’s not labor-intensive or time-consuming. All you need is a Dutch oven and a few practice runs to get “real bread.” The cost per loaf is 50 cents to $1.
I think they’re talking about actual bread with a crust that crunches when you bite into it and that keeps the bread fresh for a couple of days, or even weeks, depending on the thickness of the crust, as the bread sits on a shelf, until you cut into the crust — the kind of bread that is destroyed when put into a plastic bag. That kind of bread has to be baked in a real oven, and a wood-fired stone oven would be a special treat.
Yes, Wolf, that one. You can make it at home, with crust. French or Italian. Steam in the dutch oven makes the crust. Easily lasts a week and still very good. You will get 90% to professional artisan bread for 50 cents.
youtube . com/ @Mybreadrecipevideo
No not that one. You don’t get a quarter-inch thick dark-brown crust by steaming it.
Business investment outrunning consumption growth is a classic recession story: “Oops, we built too much capacity”.
The part I can’t wrap my head around is inflation. All those nominal charts would need to go up and to the right even if there was no trend and it was just prices rising at 2% per year. Similarly, nominal consumption would look like a rising trend even if everyone bought the exact same things each year.
But yea, even the inflation adjusted metrics I look at show a rising trend of real consumption and business investment…. and debt. This can work as long as productivity increases, but spending can also outrun productivity.
The ‘secret sauce’ to the increase in consumption we’re seeing is the ongoing reduction in the US personal savings rate. The money not saved is going into consumption of goods and services.
Can you clarify something? The word “include” in your sentence:
“Manufacturers of core capital goods include manufacturers of fabricated metals, machinery, computer and electronic products including semiconductors, electrical equipment, and others.”
makes me think that the figures shown in the last four graphs must be components/subsectors of the figure ($78 Billion) that is shown in the first graph (core capital goods), but the $78 Billion for core capital goods orders is clearly less than the total of the $ amounts reflected in the last four graphs.
What am I missing?
Well no. Core capital goods have subtracted out all goods related to transportation and defense. There are separate industries for transportation equipment manufacturing, aircraft and components manufacturing, defense equipment manufacturing, etc. that I did not list. But a clean subtraction is not available for the industries I specifically listed — fabricated metal products manufacturing; machinery manufacturing; computer and electronic products manufacturing; electrical equipment; appliances, and components manufacturing — and there is some crossover, for example to transportation equipment manufacturing.
Transportation equipment manufacturing (NAICS 336) is a gigantic industry, with $119 billion in orders in November (+15% MoM, +29% YoY), far larger than core capital goods, consisting of the below industries, many of which are also related to business investment but are not included in core capital goods and are not included in my list either:
— Motor Vehicle Manufacturing
— Motor Vehicle Body and Trailer Manufacturing
— Motor Vehicle Parts Manufacturing
— Aerospace Product and Parts Manufacturing
— Railroad Rolling Stock Manufacturing
— Ship and Boat Building
— Other Transportation Equipment Manufacturing
By contrast, all defense capital goods orders, including defense aircraft, were only $20 billion in November, and roughly flat with a year ago.
OBBBA had created massive incentive to front load spending for AI, R&D, and automating factories.
“100% bonus depreciation, restored by One Big Beautiful Bill Act (OBBBA) in 2025, is projected to reduce federal tax receipts by $172 billion in 2025 alone, according to estimates by Joint Committee on Taxation”
Corps are borrowing $ Billions to get automatic 21% return & providing major cash flow from no estimated quarterly tax payments.
Good call.
No they don’t get a “21% return.” If they invest $1,000, that $1,000 is gone, out the door. They get a 21% reduction of that $1,000 cost. So they’re still out $790. So now they have to make that investment work so that they get an actual return on their investment ($790). If that investment leads to nothing, they will have a loss of $790 (minus taxes).
:) That’s the good stuff!
This country hasn’t had a traditional “business cycle” recession since the “deficits don’t matter” attitudes started over 40 years ago with Reagan. You can enjoy a lot of prosperity endlessly charging significant items to the national credit card.
This AI data center buildout is stock market bubble bullshit. This is all driven by a massive AI mania.
We are in the most grotesque speculative mania in the history of the world which is enriching the already obscenely wealthy even more. We have never needed a crash more than we do right now.
The amount of malinvestment and waste of natural resources that is occurring is disgusting beyond words.
AI will be bigger than Internet. So the bubble is bigger than Dot Com. The crash will be yuuuge.
Agreed.
What’s really grotesque is that ordinary people have to pay more in electricity so that big tech can build these useless data centers.
Agreed
If AI succeeds then we all lose our jobs because we get replaced. If AI fails then we all lose our jobs because the economy crashes. And the tech bros are all shouting “It’s going to be great guys! What? Why aren’t you excited?”
Meanwhile, we’re already at 1.5C of global warming. The models are saying 2C around 2035 – 9 years away! This should be a break-glass moment and instead the billionaires are talking about gigawatt data centers.
Wolf, another great article. i would be interested in seeing these charts in inflation adjusted cost. I would assume most of the industrial equipment and goods were a lot less expensive in 2018-2019. The increases would not appear as significant.
1. To adjust durable goods orders that manufacturers receive for consumer price inflation, which is dominated by consumer services (rent, insurance, etc.), would be inane BS.
2. No one has ever ordered at or paid inflation adjusted prices. Not ever in the history of mankind. Go order a diesel generator set from Caterpillar and tell them that you will only pay the inflation adjusted price, LOL.
The odds of an AI blowup I think are way off. Open AI has restructured and Microsoft has a 27% stake. Microsoft gets use of IP until AI reaches level 5, which has to be independently verified, but of which it will be unlikely to be in a hurry. I think most people think of Level 1, chatbots, but it is already solidly in level 2 and 3 and showing some limited use in level 4. Level 5 is entirely a different level so I don’t even bother to guess at that.
In short, I think the AI boom is going to go strong and possibly boost some other industries, perhaps in the energy sector as well. Not suggesting AI won’t be hugely disruptive to society but don’t sense anything resembling a crash.
Let’s assume that it doesn’t blow up. Outside of big tech, I’m not seeing who is actually making money on this stuff.
I agree. AI has a long way to go, and when it tapers off, it will be that, not a crash. AI will get better as we go, and that will help it to provide returns to the companies that provide it, and the companies that use it.
I don’t think it will be hugely distruptive quickly, but it will be so over a period of a decade or two. Much like the internet: it took a while, but compare 2015 to 1995 and the difference was huge. Compare AI in 2043 to 2023, and we’ll see the same.
For those pointing to a crash a la the dotcom crash, it won’t be similar. Back then, easy to start a dotcom company, and lots of money being thrown at companies without even a business plan. AI is not easy to get into, and there will be only a handful of huge companies that will basically control the market, so to speak. Those companies can both make huge investments, make huge profits, and deal with huge losses should they bet wrong in some areas. Google has for several years been spending huge on AI, and look at its profit margins for the last 3 years (too soon for 2025):
2024: $100.1 billion
2023: $73.8 billion
2022: $59.97 billion
Either Google is already reaping substantial profits from AI, or its other businesses are doing so well even massive AI spending isn’t making a blip on its profit trend. Same with Meta.
No, Google is not reaping substantial profits from AI. It’s reaping substantial profits from its using its position to monopolize the digital ad market, and stealing from everyone else (why do you think every newspaper now, even in small towns, requires subscriptions to read?). Wolf has written about similar things before, but I can’t find the article.
Most people aren’t aware of the many ways AI is already increasing productivity. I previously posted how my team leveraged it four years ago to fully automate our processes.
My truck drove me from Illinois to Texas and back, over this Xmas break.
Claude just introduced cowork which is the beginning of empowering white collar work outside of IT. That though, may reduce the need for some IT.
So here’s my question what happens if salaries stay relatively flat and the employment market stays as it is? Or gets worse because of AI? Does this spending matter if it doesn’t trickle down to most of population?
Obviously stock market goes up for a bit? But this just makes the K wider?
If you study the great revolutions of history, they provide a clue. AI will speed up the widening of the gap between the top 10% and every one else. Trump was the first wave of revolution to crest, when he fails to raise the living standards of the bottom 90%, the bonfires will become bigger. Meet the new boss, same as the old boss…
You need to clarify the kind of revolution. American Revolution versus October Revolution and so on. The problem too, with many but not all, is people get rid of one master to substitute with another. China is a fascinating study in sovereignty as after the century of humiliation they will not submit to anyone again. To me the Chinese revolution is a model of not submitting to the next world power who wants to dominate you.
Looks like this bull market has more room to run….
Based on what? The Dow 30 drop today of more than 400?
All these build-outs will require newer and more electrical infrastructure. This means more copper and silver. Having said that, I think it is time to sell your physical metals and buy the miners. They will go 3-6x from here.
WB,you have immediate financial needs sell,me,have too much fiat and will hold my stacks,really hope to never use and pass on but have no idea what the future holds.
I will be putting monies into land and investments in said land,really am becoming very distrustful of the world of paper investments but glad others will as if it all holds together said investments helps hold it together.
Having grew up on a very large dairy farm, I am confident that I could live “off grid”. Having said that, good luck finding arable land that you won’t be subject to taxes!
I am quite comfortable with my own properties and rental properties. Remember, location, location, location. Good luck to you!
The government is attempting to do the only practical thing it can do at this point. With over 140 trillion in off balance sheet debt. Run the economy very hot and let the inflation roll in a try at outrunning the debt and more importantly interest costs.
Will it be successful…….we better hope so…….the thermometer is the price of yellow metal. If you see a top in pricing……it’s working…..if not…..it’s not……of course this will play out over the next decade…..not a week or two. The central banks of the world will be watching very closely.
There is another realistic and obvious path they can take. They can add progressivity to the tax rates and cut spending, which should reduce the deficit and inflation over time. This would put pressure on RE and stock valuations, but if asset prices drop 20-30%, so what. A small minority of folks owns the great majority of assets.
Remember the 2000 price bubble? Stock prices dropped 50%, but employment didn’t suffer too much.
Where do you come up with the laughably false assertion of ‘140 trillion in off balance sheet debt?’ None of that is debt at all as to unfunded future obligations until and unless those amounts are actually spent.
What a load of crap. We have had these debt:GDP numbers before and we KNOW how we got out of it. Progressive taxes and a BALANCED BUDGET for starters. The republicans had a great opportunity to actually balance the budget and there wasn’t a damn thing the democrats could have done, instead they increased spending for an administration that is full of incompetent criminals…
LOL!
History repeating
ChatGPT will start showing ads as part of a limited testing phase for free users.
This model works as we know from Google’s search engine experience. AI companies will generate revenue.
they will tailor the ads specifically to what they know about the user, which might be everything if the user talks with a chatbot, allows AI into the email, use AI on their smartphone, use AI agents anywhere, etc. (if you use Gmail, it’s impossible to keep AI out of your email, it’s now part of the package). And most consumers, especially younger consumers, don’t mind if these companies know everything about them, including who they date and sleep with, which they’ve known for years. AI just refines it and adds another layer of user info on top of it. So that advertising model should work pretty well for the AI companies.
That affirms though my belief that much of AI is not actually benefiting the the consumer, or society.
Are smartphones or the Internet benefitting the consumer or society? And who is to blame for the enshittification of potentially great technologies?
Big data is a scary thing. But as you said, this has been done for years. This isn’t new.
But the type of stuff many are telling chat gpt will make people even easier to manipulate
I’ve always been ok with this, if I get value from it. That has sadly been lacking for many years now. Customer focus is no longer a need for technology companies. They own the devices and algorithms.
A good reason to just use Gemini.
I read an interesting article on either wired or the verge saying Google will win the AI race because they can run the others out of money because they can subsidize their AI losses with other revenue streams whereas OpenAI needs to charge fees or support advertising – neither of which is likely to cover their costs.
7:45 AM 1/27/2026
Dow 48,956.72 -455.68 -0.92%
S&P 500 6,982.35 +32.12 0.46%
Nasdaq 23,828.19 +226.83 0.96%
VIX 15.99 -0.16 -0.99%
Gold 5,073.40 -9.10 -0.18%
Oil 61.32 +0.69 1.14%
Gold is going to fall 30%. Calling it
LOL! Priced in what, exactly? Dollars? Yen? Yuan? LMFAO!
Got a time frame for us as well?
Priceless.
Probably 50% + from the peak? (Along with Crypto and Tech).
The margin call ALWAYS comes.
See, I was pretty right as of today jan 31st.
🔮
I’m catching what you’re throwing. Said the way – until Ulta Beauty’s earnings fall, ain’t no stoppin’ this freight train U.S. economy!
Ok maybe that’s not the same way. I contend mine’s easier to follow…
1:04 PM 1/27/2026
Dow 49,003.41 -408.99 -0.83%
S&P 500 6,978.60 +28.37 0.41%
Nasdaq 23,817.10 +215.74 0.91%
VIX 16.26 +0.11 0.68%
Gold 5,174.70 +92.20 1.81%
Oil 62.61 +1.98 3.27%
MW: Why shares of UnitedHealth, Humana and others insurers are tanking — and taking the Dow with them
Happy new year? Americans in a foul mood despite seemingly strong U.S. economy.
What happened to the morentorium on the IRS requiring all 1099s over $600 being reported. I thought the limit was raised to $10,000. This is another lie. I’m getting deluged with 1099s from lenders who we did $625 worth of business in 2025. My sports betting site is sending me a 1099 for winning $1000 on sports bets in 2025. Looks like the Yellon/Biden attack on middle class by requiring every nickel to be reported while the rich pay nothing is continuing in this new administration.
“I thought the limit was raised to $10,000.”
Where did you see that? I never saw that.
I think he’s referring to the (feel free to remove the link, I’m sending it for your purposes) PayPal reporting requirement, not the general 1099 requirement that has long been $600.
https://www.paypal.com/us/cshelp/article/will-paypal-report-my-sales-to-the-irs-help543
Wolf,
It’s in the Big Beautiful Bill. It was suppose to be retroactive from Jan 1st 2025. I’ll see if I can find the verbage. I went to the Post Office today and received 3 1099s for $625, with threats of fines or imprisonment if they are not reported. I wonder what other lies are in that BBB. The “No tax on SSA” is another lie. You still have to report your income it on your 1040. They did raised the Standard deduction. For 2026, you still have to pay tax on your SSA income, plus a self employment tax (15.3%) on your Self employed income.
Looks like I was mistaken. The change was applied to 1099-K income via Paypal and Venmo. The limit of $600 was not changed. That would be consistent with the fact that I’m getting these 1099s for $625 etc. from lenders.
Lots of interesting comments on AI. I keep wondering if actual intelligence is possible without consciousness. Neither term can be defined with real precision.
AI doesnt have to be skynet to have a huge impact on the economy. Most jobs are not really knowledge jobs. There are many thousands of jobs that are backoffice, transaction processing and compliance jobs. AI as it works today is probably more relevant and effective applied to those more narrow and constrained domains.
Applications to law, particularly contract and regulatory law seem like perfect domains to aim AI at.
AI does not have to be perfect to be radically disruptive. We assume that those displaced by this tech will find new jobs supporting the new tech. The argument is that is the way it’s always happened. I guess we will find out.
the other sections of that report have not been as consistent as new orders; ie, shipments down 0.2%, inventories up 0.2% in November…and the unfilled order book grew 1.3% and is up 9.3% YoY, largely on a 18.7% increase in new orders for civilian aircraft…it’s like the orders keep rolling in, but production doesn’t respond..
The big difference between Austrian malinvestment and real investment. One benefits customers, is profitable, lowers real costs, and increases productivity while the other is non-sustainable.
Do you think the current surge in core capital goods orders can really sustain the broader economy, or are we just seeing a temporary spike before a slowdown? It seems like businesses are still heavily investing in infrastructure and equipment, which could keep momentum going for now. On a practical note, in sectors like food service or manufacturing, temporary solutions—such as modular refrigeration units in places like Bakersfield—can help companies adapt quickly when investment cycles shift.
Something else to keep in mind is timing. A lot of these equipment orders were likely decided months ago, so the numbers can look strong even if businesses are starting to feel more cautious now. In real life, that often shows up as projects getting pushed back instead of canceled, especially in places like commercial kitchens or refrigeration-heavy operations. That delay can make any slowdown harder to spot at first.