Oxford Economics: US corporate spending on equipment and facilities is set to rise 40% from 2021 to 2027, over 3x faster than in Europe, driven by the AI race
The bloc struggles to keep up with US spending on high-tech equipment and facilities
Context & Ripple Effects
Oxford Economics now puts numbers on a gap its own earlier work helped trace: after showing that roughly 60% of US data center capex flows abroad to imported IT gear (~60% of US data center capex is spent on imported IT gear), it projects US corporate spending on equipment and facilities rising 40% between 2021 and 2027 — over 3x Europe's pace — with the AI race as the driver.
The investment gap is not new. Preqin data already showed the US capturing 83% of G7 venture funding over the past decade (83% of G7 VC funding went to the US), and European firms have responded by pivoting toward industrial applications rather than competing head-on (Europe's engineering companies and AI startups are pivoting to industrial AI). This forecast extends that divergence from financing into physical capital.
First-order effects
- Suppliers of high-tech equipment — the Taiwan, South Korea, and Vietnam exporters identified in Oxford Economics' earlier trade analysis — capture most of this US spending surge, since the gear is largely imported rather than domestically produced.
- European corporates face a widening capital-intensity deficit against US peers through 2027, reinforcing the retreat from consumer AI into efficiency-focused industrial applications.
Second-order effects
- Global trade composition tilts further toward AI-related IT hardware, amplifying the import dependence of US AI buildout and tying American capex plans to Asian supply chains.
- The US-China framing gets more complicated: with Chinese state and corporate money concentrated in EVs and robotics rather than frontier AI (China is spending to dominate EVs and robotics instead), Europe's underinvestment leaves it squeezed between two rivals optimizing different domains.
Third-order effects
- If heavy AI spenders keep adding workers faster than peers while gains concentrate in tech companies and startups (heavy AI spenders are adding workers faster than peers), the returns to this 40% capex wave accrue narrowly — deepening the capital-income versus labor-income split the related research flags.
- Structurally, the pattern points to a bifurcated West: a US building AI infrastructure at scale and a Europe specializing in applying it industrially, with the gap compounding through both venture funding and physical investment cycles.
The trend: The AI race is splitting Western capital formation, with the US entering an infrastructure supercycle while Europe redirects toward industrial applications — a divergence visible in everything from VC shares to imported server gear.