10/01/2026
AI investment is currently serving two functions in the US economy: driving capex-led growth while helping keep financial conditions loose. Earnings growth remains the primary driver behind AI's performance, with hyperscalers recycling cash flow from their profitable core businesses back into AI, forming a virtuous cycle between earnings, cash flow, and capex.
Spending has stayed disciplined, with these companies generating enough to fund buybacks, dividends, and AI capex all at once, roughly 60% of operating cash flow on average. Tech also continues to lead upward revisions to US earnings estimates, defying the usual pattern of downgrades that builds through the year.