Federal Reserve Bank of San Francisco Vice President Adam Shapiro has highlighted a shift in U.S. investment, saying spending is moving away from residential investment and toward computers as the AI investment boom accelerates.

In a Friday LinkedIn post, Shapiro wrote, "We’re seeing a pivotal shift in the US economy: investment is shifting away from residential investment and towards computers." He pointed out that inflation-adjusted spending on information-processing equipment, which includes data centers and computer hardware, now exceeds residential investment.

Investment Shifts

Data from the Bureau of Economic Analysis released in August shows real private residential fixed investment at $748 billion in the second quarter, while information-processing equipment reached $752 billion. Shapiro said the AI investment boom is "massive."

Shapiro also noted that residential investment is more sensitive to borrowing costs, while AI investment has been less sensitive to interest rates.

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AI Capex Accelerates

The AI investment cycle is also expanding rapidly. Data-center capex is projected to rise from 1.4% of GDP in 2025 to 3.1% in 2027, an increase of roughly 0.85 percentage points a year.

"The AI cycle is building at close to twice the pace of the housing boom at its fastest," Torsten Slok, Partner and Chief Economist at Apollo Global Management, said.

Hyperscaler capital expenditures are expected to reach about $916 billion over the next 12 months and nearly $1.2 trillion the following year.

Spending And Risk

S&P Global estimated capital expenditures from Alphabet Inc. (NASDAQ:GOOG) (NASDAQ:GOOGL), Amazon.com Inc. (NASDAQ:AMZN), Microsoft Corp. (NASDAQ:MSFT), Meta Platforms, Inc. (NASDAQ:META), Oracle Corp. (NYSE:ORCL) and Space Exploration Technologies Corp. (NASDAQ:SPCX) will exceed $1.3 trillion in 2027, S&P Global Ratings reported that all six hyperscalers are expected to generate negative free operating cash flow in 2026 and 2027, with recovery not projected until 2029.

The firm is also monitoring AI investment monetization, demand durability and overcapacity risk, while its models generally assume a 2028 inflection point, with revenue accelerating and capital expenditure growth moderating.

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