U.S. Computing Power Investment Exceeds Housing Investment
Private investment in data centers and information processing equipment in the U.S. has surpassed residential fixed investment. According to data from the Bureau of Economic Analysis, inflation-adjusted private residential fixed investment in the second quarter was $748 billion, down 18% from the peak in early 2021; during the same period, spending on information processing equipment rose to $752 billion, an increase of 51%.
Adam Shapiro, Vice President of the San Francisco Federal Reserve, referred to this crossover as an economic shift: funds are moving away from housing and into computing. Housing has been largely frozen since the interest rate hike cycle began in 2022, being more sensitive to borrowing costs; computing power spending is driven by a few large-scale cloud providers and does not rely on typical mortgage rates.
Data center construction, according to census data, is also on the rise. In July, private data center construction was approximately $75 billion annualized, up about 57% year-on-year. Excluding server rooms, non-residential construction is nearly flat or declining, with traditional office buildings still dragging down the figures. Data center construction starts in 2025 are nearing $77 billion, almost three times that of the previous year.
Torsten Slok, Chief Economist at Apollo, estimates that capital expenditures for large-scale data centers as a percentage of GDP will rise from 0.3% in 2019 to 1.4% in 2025, and may approach 3.1% by 2027. This growth rate is faster than the peak phase of the housing boom from 2002 to 2005 and exceeds the peak of telecommunications fiber optics in the late 1990s. However, the level remains below the peak of about 6.6% for housing in 2005, but the changes in share and speed are already greater.
S&P Global estimates that capital expenditures for Alphabet, Amazon, Microsoft, Meta, Oracle, and SpaceX will be about $470 billion in 2025, approximately $870 billion in 2026, and may exceed $1.3 trillion in 2027. In areas like Northern Virginia, data center land has reached several million dollars per acre, making it difficult for residential developers to compete for the same land, electricians, and transformers.
Market mechanisms indicate this is a reallocation of capital, not a one-day market trend. Buyers are betting on the realization of investments in electricity, chips, data center REITs, and large-scale technology capital expenditures; sellers are focused on housing construction, timber, and interest rate-sensitive real estate. Funds are flowing from the mortgage-driven residential cycle to the servers, land, and power grids of a few companies. Beneficiaries include cloud providers, power equipment, and semiconductors; those under pressure include homebuyers and local finances reliant on residential construction.
Source: Public Information
ABAB AI Insight
The focus of private investment in the U.S. has shifted several times: from building houses in the 1960s to 2000s, briefly overlapping with fiber optics around 2000, and after the housing collapse in 2008, a return to tech stocks. This latest crossover is driven by large-scale companies post-ChatGPT, which have made it essential to complete data centers before training and inference can occur. Housing is locked by interest rates, while computing power is propelled by a few capital expenditure directives, allowing the two lines to intersect in a single quarter.
The flow of money is highly concentrated. Alphabet, Amazon, Microsoft, Meta, along with Oracle and SpaceX, are pushing annual expenditures from hundreds of billions towards trillions. Data center land, substations, and cooling compete for the same land, labor, and power grid as residential development. The motivation is not to encourage families to buy more homes, but to secure the installation window for the next generation of models. Whoever locks in electricity and chips with long-term leases first will push their competitors out of line.
In a similar position, this is closer to the peak of telecommunications capital expenditures in 2000 rather than the 2005 housing leverage boom. The industry phase is shifting infrastructure from "one home per person" to "one power plant per model." The share of office buildings has already given way, with data centers becoming the new focus within commercial real estate.
This structural change represents a reconstruction of the industrial chain. When the primary destination of private fixed investment shifts from housing to information processing equipment, the transmission of growth, employment, and inflation reroutes: first through chips, electricity, and the balance sheets of a few cloud companies, then indirectly impacting local taxes and electricity prices. The mechanism is that housing relies on the aggregation of mortgages from millions of households, while computing power relies on capital expenditure directives from six or seven companies; the latter is faster and more capable of raising interest rates and electricity prices together.
ABAB News · Cognitive Laws
Capital first flows to a few companies that can place orders
Housing competes on interest rates, data centers compete on electricity
The day of investment crossover is the moment growth shifts engines