America’s Artificial Intelligence Manufacturing Boom
The Commerce Department reported on Wednesday a notable increase in core business equipment orders, with prices climbing 3.3% in March, marking the largest monthly rise since summer 2020.
The reason for this uptick is clear: orders for computer and electronic products jumped by 3.7% to $29.6 billion, reflecting a growth trend over 11 of the past 12 months. This indicates that the cycle of investment in artificial intelligence is, in fact, speeding up rather than slowing, and it seems that concerns about the ongoing conflict in Iran and soaring oil prices aren’t dampening enthusiasm.
However, the major takeaway from the March report on durable goods isn’t just that companies are investing heavily in AI—though that part has been evident for a while. What’s really crucial is where this spending is manifesting: in domestic manufacturing orders, rather than a significant uptick in imports.
This aspect is deserving of significant attention. The AI boom is driving a high demand for servers, networking tools, chips, and the industrial hardware necessary to develop and sustain data centers. In the past, under different policies, this demand would have predominantly been satisfied by overseas producers. An American firm would place an order, and goods would likely arrive from East Asia, possibly produced in China.
This time, though, it’s different. The wave of AI investment is translating directly into orders at American factories. Core capital goods orders—which exclude defense and airplanes—exceeded the consensus estimate of 0.5%. Notably, February’s earlier growth rate was adjusted from 0.6% to 1.6%. Shipments of core capital goods, which contribute to the capital expenditure figures in GDP, rose by 1.2%, following a 1.3% increase in the previous month. It’s important to note that these figures reflect domestic orders and shipments, not imports.
Of course, we still rely on imports for microchips and technology. It wasn’t realistic to expect that President Trump would entirely eliminate our dependence, and even those who advocate economic nationalism recognize that some technology sourcing from abroad is necessary. Instead, Trump’s policies aim to rebalance trade rather than abolish it.
The broader data supports this narrative as well. Orders for machinery increased by 0.8%, electrical equipment by 0.8%, and primary metals by 0.4%. These are part of the upstream industries supplying the materials and components needed for AI infrastructure, and much of it is being produced domestically. Just to recall, prior to the tariffs initiated by President Trump, primary metals were struggling.
This rise was substantial enough to increase overall durable goods orders by 0.8% to $318.9 billion, breaking a three-month decline and surpassing predictions of a 0.5% uptick.
Change Following Trump’s Election
This scenario seemed inevitable. Previously, the economic trajectory before Trump focused on swiftly translating American innovation into global supply chains reliant on imported goods—a move that often undermined domestic industrial capacity, regardless of whether it was genuinely cheaper than U.S. production. Thus, major investment waves, from the internet boom in the late 1990s to the smartphone revolution in the 2010s, saw far more manufacturing activity occurring abroad than at home.
However, President Trump’s tariffs, efforts to incentivize reshoring, and a broader shift in trade policy have altered this dynamic. By raising costs associated with overseas production, these policies created incentives to manufacture domestically. Detractors have argued for years that this wouldn’t succeed and that America should accept a decline in manufacturing while adapting to lower growth rates and wages. Yet, the March durable goods report illustrates what occurs when a new, significant source of demand is introduced into an economy reshaped to foster production alongside consumption.
The AI boom could have easily just enriched foreign manufacturers, but instead, it’s increasingly reflecting the revitalization of American manufacturing—a transformation that didn’t occur by mere chance.
