Apollo’s Torsten Slok put a name to what the Fed is actually fighting: FOMO. The largest, most cash-rich companies on the planet are in a capital expenditure arms race that is structurally indifferent to the federal funds rate. This is the transmission mechanism problem that keeps Fed officials up at night.
ByteDance triples capex to $70B: Up from $25 billion last year. TikTok’s parent is going 3–4x on spending to lead the Chinese AI market and challenge U.S. hyperscalers. Microsoft $MSFT, Alphabet $GOOGL, and Amazon $AMZN face a competitor now spending at comparable scale.
One Big Beautiful Bill depreciation effect: The tax bill allows near-immediate same-year depreciation of capital investment in manufacturing, property, and equipment. Hyperscalers doing massive capex are capturing the full tax benefit in year one.
S&P 500 earnings growth expected at 20%+: With zero net job additions outside healthcare. The corporate sector is expanding profits without expanding headcount — AI is enabling margin expansion before the productivity revolution shows up in aggregate data.
IG credit spreads near all-time lows: Investment-grade spreads are one point from their post-2000 tightest. Infrastructure deals are being priced at 5–8% with no hesitation.
When Lisa Abramowicz asked bankers directly whether higher rates would stymie infrastructure deals, every single one said no — because it’s existential spending, priced independently of the rate environment. Amazon isn’t going to pause a data center build because the Fed moves 25 basis points. The capex cycle is rate-agnostic in a way that the Fed’s models were not built to handle.
Which creates a genuinely strange situation: the parts of the economy most sensitive to rate hikes (housing, small business, lower-income consumers) are already getting hurt. The parts driving inflation — hyperscaler capex, AI infrastructure, financial conditions easing through equity wealth effects — are completely insulated. A rate hike in that environment doesn’t cool the inflation source. It just accelerates the K-shaped pain.
The SpaceX IPO adds another dimension. The filing — potentially the biggest IPO ever at a $2 trillion valuation — is generating a halo effect across the entire space infrastructure sector. Redwire $RDW and AST Space Mobile $ASTS are surging on the expectation that a successful SpaceX debut reprices every adjacent name. Tesla $TSLA-SpaceX merger speculation is growing louder. Capital is chasing the next trillion-dollar club member, and the gravitational pull of AI and space capex is making the Fed’s rate policy feel almost beside the point.
Related Stocks: $MSFT, $GOOGL, $AMZN, $RDW, $ASTS, $TSLA, $SPCX,
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