Morgan Stanley expects United States business investment to rise about 7 percent year on year in the fourth quarter of 2026 and 8 percent in 2027, with artificial intelligence related spending a major part, in a forecast that cuts against the gloom of the week worst trading day. The bank sees companies continuing to spend on the infrastructure behind AI, even as voters and politicians argue about where that infrastructure should go.
Why it matters
The forecast sits inside a week of violent disagreement about the AI trade. On Thursday, the Philadelphia Semiconductor Index plunged 12.2 percent, its biggest one day drop since April 2025, as investors decided that the midterm results mean slower approvals, tougher terms and higher costs for the data centre buildout. On Friday, the index gained 4.2 percent, recovering about a third of the loss, as AMD reported data centre sales nearly doubled and forecast sales growth of 80 percent in 2027.
The disagreement underneath the bounce is really about timing, and it is the same disagreement that split Wall Street all week. Goldman Sachs argued that technology giants may pull capital spending forward into 2027, rushing to build under current approval conditions before new policies take effect. Jefferies described the selloff as reactionary rather than a fundamental reset, driven by a collision of concerns rather than by a change in the underlying business.
What happens next
The regulation fear that drove the selloff has not gone away. Voters in at least 29 jurisdictions approved bans or restrictions on data centre construction, and a new Congress is expected to scrutinise data centre construction, semiconductor exports and energy use. Texas, Georgia and Ohio, which together hold nearly a third of the country operating and planned data centre capacity, all elected Democratic governors.
What happens next will be decided by the next set of chip earnings, and by the capital spending plans that follow them. If other suppliers report similar strength in data centre demand, the Morgan Stanley forecast will look like the base case, and the buyers will return in force. If they report weakness, the rout will look like the start of a cycle. Either way, the lesson of the week is that the market and the politics of AI are now moving together, and neither can be read without the other.
