Dual Capex

Today’s graph from Crescat Capital LLC highlights a stark divergence: large-cap US tech has sharply increased its capital investment since COVID, while the broader US mid-cap universe — representative of the real economy — has cut CAPEX by roughly 30% vs. pre-pandemic levels.

One can argue that Big Tech may be flirting with over-investment in the AI narrative — but spending only the bare minimum to cover depreciation, as many traditional companies do, is unlikely to sustain innovation, competitiveness, or long-term growth. In capital-intensive cycles, under-investing can be just as dangerous as over-investing.