US growth driven by tech investment in first quarter
At a Glance
The desk interprets the recent commentary as highlighting the pivotal role of technology and AI investment in driving US economic growth, particularly in the face of waning consumer spending. Per the full note from ing-think, durable goods orders indicate that this trend is likely to persist throughout the year, although concerns linger regarding the narrowness of the growth narrative. This perspective aligns with our consensus target for the USD, which is currently positioned at 1.075, suggesting a cautious but optimistic outlook amid a lack of immediate high-impact events on the calendar.
Key Takeaways
- 01US economic growth is increasingly reliant on tech and AI investments.
- 02Durable goods orders support this positive trend, but overall growth breadth is questionable.
- 03A narrow focus on tech could pose risks to sustained economic momentum.
Full Analysis
What the desk is arguing
The US economy is increasingly fueled by significant investments in technology and artificial intelligence, even as consumer spending shows signs of fatigue. Durable goods orders indicate a strong continuation of this investment trend, suggesting a notable transformation in the economic foundation of the US.
However, there are rising concerns about the narrow focus on tech-related growth. Without wider contributions from other sectors, the economic outlook could be vulnerable to shocks, creating uncertainty around the sustainability of this growth path.
Where it sits in our coverage
Our consensus target for USD against a basket of major currencies is 1.075, with a spread reflecting the economic sentiment around technology-driven growth. This outlook aligns with the broader narrative of investment-led expansion but also raises flags about potential overheating or sector-specific risks that could impact currency performance.
Specific targets from notable firms include: - JPMorgan: 1.10 (Mar26) - Goldman Sachs: 1.07 (Mar26) - Barclays: 1.06 (Mar26)
How other firms see it
A few firms express alignment with our bullish view on USD relative to this tech-driven growth narrative, particularly in light of forthcoming earnings from key tech players. However, some caution against relying solely on these sectors for sustained economic health.
- Goldman Sachs: aligned with the investment growth narrative.
- BofA: contrary stance, emphasizing risks associated with the narrow sector focus.
Market Implications
The focus on technology investments may provide a short-term boost to the USD, particularly if labor market figures remain strong. However, the potential lack of breadth in growth could trigger volatility and adjustments in market positioning as investors reassess risk profiles in response to changing economic indicators.
From the original
UNITED STATES: Amid some cooling in consumer spending, investment linked to tech and AI has clearly become the main engine of growth in the US. Durable goods orders suggest this trend will continue through much of this year, but there are concerns that there is a lack of breadth
Related speeches
4 itemsHow much is AI contributing to US economic growth?
Lead — The emergence of AI technologies is poised to be a major driver of US economic growth, with projections suggesting that it could account for a third of GDP expansion as early as 2026. Per the full note by James Knightley at ING, the surge in investments aimed at bolstering AI infrastructure, particularly in data centers, reflects an overarching strategy to counter foreign competition and enhance domestic capabilities, which has been supported by federal incentives. This development intersects with current economic narratives as elevated mortgage rates and housing affordability issues continue to stifle residential construction, thereby emphasizing the significance of technological investments in non-residential sectors.
Ahead of the curve with Ulrike Hoffmann-Burchardi
The desk believes that the U.S. economy is set to benefit significantly from the expanding AI market, a sentiment bolstered by NVIDIA's projections of a $600 billion AI spending this year, potentially growing to $3-4 trillion annually by 2030. Per the full note from UBS, this growth is not just optimism; it reflects robust underlying structural and cyclical factors, including a revised Q2 GDP estimate of 3.3% driven by strong consumer spending. The consensus view suggests a readiness among equities to capitalize on this positive economic trajectory, despite some historical skepticism regarding sustained high growth rates.