Apollo Reports AI Capital Expenditure Rises Amid Rate Increases, Driven by the Magnificent Seven
Monetary Policy Impact: Apollo's chief economist, Torsten Slok, highlighted a divergence in corporate investment trends, noting that while higher interest rates typically suppress capital expenditures, investment in AI infrastructure remains robust.
AI Investment Drivers: The growth of data centers, essential for AI technology, is being supported more by rising equity valuations of major tech companies (the "Magnificent Seven") than by traditional debt markets.
Weakening of Fed's Influence: Slok argued that the increase in equity prices has diminished the effectiveness of the Federal Reserve's monetary policy, indicating that overall financial conditions are now more influential in corporate investment decisions than the federal funds rate.
Stagnation in Other Sectors: Outside of AI, corporate capital expenditure growth has largely stagnated, contrasting sharply with the flourishing investment in AI-related projects.
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