Business equipment orders jump 1.6% in August as AI data-center boom drives investment

Orders for the equipment that powers America's industrial base jumped far more than economists expected in August, new government data showed Friday, as manufacturers race to keep pace with an artificial-intelligence infrastructure boom that is reshaping business investment across the economy.

New orders for nondefense capital goods excluding aircraft — a closely watched proxy for business spending known as core capital goods — rose 1.6 percent in August, according to the advance report on durable goods manufacturers' orders published by the U.S. Census Bureau. The increase more than tripled the 0.5 percent gain forecast in economist surveys, and followed an upwardly revised 0.6 percent rise in July that had originally been reported as flat.

The numbers

Core capital goods orders totaled $88 billion in August, up 14.1 percent from a year earlier, according to the Census data. Shipments of the same category, which feed directly into gross domestic product calculations, rose 0.6 percent after a 1.4 percent increase in July, pointing to sustained rather than one-off strength.

Total orders for durable goods — items meant to last three years or more — were essentially flat at roughly $339 billion for the month, restrained by volatile aircraft orders, but were up 8.5 percent from a year earlier. Excluding transportation, orders rose 0.3 percent. The three-month moving average of core capital goods orders climbed 9.3 percent year over year, and cumulative orders through the first eight months of 2026 reached $665.7 billion, up 10.6 percent from the same period last year.

The gains were broad across the industrial categories tied most closely to the data-center buildout. Machinery orders, which include turbines and industrial equipment, rose 15.1 percent year over year to $45.5 billion. Orders for computers and electronic products, a category that includes semiconductor manufacturing equipment, climbed 16.5 percent year over year to $31 billion. Electrical equipment orders rose 7.6 percent from a year earlier to $19 billion, while fabricated metal products were up 8.6 percent year over year to $45 billion, though they slipped 0.6 percent from July's record level.

An AI-driven investment cycle

The August data extends a pattern that has defined much of 2026: businesses pouring money into servers, power infrastructure and industrial equipment to support artificial-intelligence workloads. Equipment investment expanded at a 15.2 percent annualized rate in the second quarter, according to the Bureau of Economic Analysis's second estimate of gross domestic product, only a modest step down from 15.8 percent growth in the first quarter — the second consecutive quarter of double-digit expansion in that category.

Eliza Winger, an economist tracked by Bloomberg, said the pattern reflects a durable shift rather than a temporary spike.

"AI-related spending, alongside a more favorable tax environment, continues to sustain investment momentum," Winger said.

That view is echoed by several forecasters who have repeatedly had to raise their capital-spending estimates this year.

Wall Street analysts have been building toward this conclusion for months. Goldman Sachs economists estimated earlier this year that global spending tied to artificial intelligence could exceed $1 trillion in 2026, with US hyperscalers and their suppliers accounting for the largest share. Friday's Census figures are the first hard evidence from the manufacturing sector itself that the pace of that spending, rather than slowing as some had predicted midyear, is still accelerating.

Who is feeling the strain

The clearest evidence of where that money is going sits in the order books of power-equipment manufacturers. GE Vernova's second-quarter earnings filing showed its gas turbine backlog climbing to 116 gigawatts, up from 100 gigawatts in the first quarter, with the company telling investors it expects at least 125 gigawatts under contract by year-end. Its electrification unit alone booked more than $5 billion in data-center-linked orders through the first half of the year, a pace that has already outstripped the demand seen in all of the prior year combined.

That crunch is rippling through smaller suppliers as well. Analysts tracking the same Census data noted that orders have spread well beyond marquee tech names, spanning "everything from rebar to gas-turbine and diesel generators for data centers," amid reported shortages of turbine components that have left some utilities and developers waiting years for delivery slots.

A two-track economy

Not every part of manufacturing is sharing in the boom. Economists cautioned that industrial segments with no direct exposure to AI infrastructure face a tougher backdrop, with rising oil prices, elevated short-term interest rates and climbing long-term Treasury yields all weighing on capital budgets outside the data-center supply chain. That divide has left some forecasters describing the sector as running on two speeds: red-hot where AI dollars are flowing, and comparatively sluggish everywhere else.

The divergence adds a new layer of complexity for the Federal Reserve as it weighs the path of interest rates heading into the final months of 2026. Strong capital spending data, on its own, would typically argue for a more cautious approach to further rate cuts, even as policymakers continue to monitor a labor market that has cooled from its earlier pace.

What happens next

The Census Bureau's full durable goods report, along with revisions to the August figures, is due in the coming weeks, and the next advance reading covering September orders is expected in late October. Investors will also be watching the Bureau of Economic Analysis's third estimate of second-quarter GDP, due September 30, for a fuller accounting of how much of the quarter's growth was attributable to equipment spending. For now, the August data offers the clearest signal yet that the AI buildout has become a measurable force in the broader American economy, not merely a story confined to a handful of technology giants.