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Business capex grew at a respectable 3.2% year-over-year in the second quarter, even as payroll growth slowed substantially. Historically, the decision to hire and invest has been intertwined at a correlation of 74% (since 2000). Enter AI, says Nancy Tengler, CIO at Laffer Tengler Investments.

Mag 7 capex is estimated to be $318 billion in Q2. That is a trailing four quarter sum. This represents 24% of S&P 500 capex, but is modest when compared to total US nominal business capex of approximately $4.1 trillion. AI and AI-adjacent investment is 44% of business construction spending and 34% of total.
 

Though many are equating AI spending to the Dot-Com Bubble, we think the party is just getting started. We are using volatility as our friend and adding to the drivers/infrastructure names on weakness.

Remember John Chambers' comment recently that AI is a more powerful productivity driver than “the Internet and cloud computing combined.” Chambers was the CEO of Cisco Systems Inc. (CSCO) in 2000 — the poster child of overvaluation since it traded at 100x peak earnings before the bust.

What do we worry about? The US government meddling in the private sector, export taxes, stakes in companies - all a dangerous precedent in our view. Let the markets pick winners and losers. Solyndra may be a distant memory, but an important one to keep front and center.

About the Author

Nancy Tengler is the chief executive officer and chief investment officer of Laffer Tengler Investments. She is responsible for active equity management research and portfolio management, as well as leading the firm. Ms. Tengler is a committed advocate of financial literacy for women as the leader of Laffer Tengler’s Women & Wealth initiative, which encourages and informs women on how to take charge of their own financial and investment planning. The second edition of her book, The Women’s Guide to Successful Investing, was published in September 2023.

As one of the most dynamic women in the investment management industry today, she is a sought-after TV and print financial commentator on local and national media outlets. Prior to joining Laffer Tengler, Ms. Tengler had a distinguished investment management career in several senior leadership roles. Most recently, she served as chief investment officer at Heartland Financial where she was also a director of Arizona Bank & Trust.

Ms. Tengler has also served as president, chief executive officer, and chief investment officer of Fremont Investment Advisors in San Francisco. Before that, she founded Global Alliance Value Investors. She also worked for UBS Asset Management as head of the Value Equities Group and with Spare, Tengler, Kaplan, and Bischel, Ltd., as president and senior portfolio manager. 

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