Publications: Notes at the Margin

Donald Trump: The Disrupter (February 10, 2025)

 

On February 6, Google announced it would spend $75 billion on AI investment in 2025.[i] Amazon will spend more than $100 billion in 2025. Meta and Microsoft are boosting capital expenditures as well. The combined capital outlay of the four companies could exceed $300 billion. The total could approach $1 trillion if one includes the spending of other companies such as Nvidia.[ii]

The oil industry is not following the tech industry’s lead. Chevron will reduce its capital expenditures for 2025 by around seven percent.[iii] Shell and other firms are cutting back as well. Only Exxon is spending aggressively.[iv] Almost all oil firms are now practicing “capital discipline” as dictated by their Wall Street investors.

The dichotomy between the tech and oil industry makes sense. The technology sector is growing. Fossil fuel production, in contrast, is dying. Many investors know that much of the world’s oil and gas reserves will be stranded by the global financial disruption caused by President Donald Trump. They also understand that tech firms must invest at increasing rates to survive once the Trump turmoil has passed.

We view Donald Trump as the world’s economic disrupter. The world economy is headed for the “Trump Crash.” Under these circumstances, intelligent investors are putting money into areas like AI, where companies must spend lavishly to avoid being left behind.

 

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