• Core capital goods orders jumped 3.3% in March, the biggest gain since 2020, signaling strong business investment.
  • AI-driven capex is fueling demand for computers, electronic products, and related equipment.
  • Policy support and tax provisions are aiding momentum, but geopolitical tensions and higher oil prices pose risks.

US business investment showed robust momentum in early 2026, led by a surge in AI-related capital expenditure. March data from the Commerce Department revealed that non-defense capital goods orders excluding aircraft—a key proxy for business spending—rose 3.3% month-over-month, the largest increase since 2020, following a revised 1.6% gain in February. Overall durable goods orders climbed 0.8%, driven by gains in communications equipment, electrical hardware, vehicles, and military aircraft. Shipments of core capital goods, which feed into GDP calculations, also strengthened, rising 1.2% excluding aircraft and 0.5% overall.

The sharp acceleration in orders reflects heavy corporate spending on artificial intelligence infrastructure, with hyperscalers (META) and large manufacturers leading the charge. "We're seeing a paradigm shift in investment priorities," said one economist familiar with the data. "AI is no longer just a buzzword; it's driving real capital allocation decisions." The gains in computers and electronic products suggest that companies are upgrading equipment to support AI workloads, from data centers to networking gear (ORCL).

Policy tailwinds are also supporting the investment cycle. Tax provisions enacted in recent years have encouraged capital spending, and potential subsidies for AI-related infrastructure (NVDA) could further buoy momentum. However, rising geopolitical tensions and higher oil prices—crude recently breached $85 a barrel—could temper the outlook. "The geopolitical landscape remains a wild card," noted a market strategist. "If uncertainty escalates, some firms may delay or scale back their capex plans."

The strong orders data bolsters expectations for a solid GDP contribution from business investment in the first half of 2026. Analysts caution that supply constraints, particularly around semiconductors and energy costs, could limit the pace of growth. Still, for now, the AI-led capex cycle appears to be gaining momentum, offering a bright spot in an otherwise mixed economic picture.

Correction: An earlier version of this article misstated the monthly change in core capital goods orders; it is 3.3%, not 3.2%.