The U.S. economy is shifting investment from housing toward AI infrastructure, with information-processing equipment spending reaching $752 billion in the second quarter, slightly above the $748 billion allocated to private residential fixed investment. The equipment figure has climbed 51% since its early 2021 level, while residential investment has declined 18%. Adam Shapiro, vice president at the San Francisco Fed, described the change as a pivotal shift, while noting that housing is more sensitive to borrowing costs. The benchmark 30-year mortgage rate is nearly 7%, and the 10-year Treasury yield has reached its highest level since 2007. Hyperscalers (large cloud-computing companies) have continued financing AI expansion despite higher rates, with Alphabet reporting negative cash flow earlier this year. Treasury Secretary Scott Bessent said AI companies have been willing to issue debt regardless of borrowing costs because they expect high returns from the build-out. S&P Global projects capital expenditures by Alphabet, Amazon, Microsoft, Meta, Oracle, and SpaceX will rise from $470 billion in 2025 to $870 billion in 2026 and more than $1.3 trillion in 2027. The ratings firm warns that spending is growing faster than revenue, creating a risk of overcapacity if demand falls short, although it sees 2028 as a potential inflection point when revenue accelerates and capital spending flattens. Operating cash flow for the six companies is expected to be collectively negative in 2026 and 2027. The spending surge is also generating political opposition: 64% of registered voters in a new NBC News poll said they would be less likely to support a candidate favoring a data center in their community. Higher electricity bills and prices for new smartphones and PCs have added to cost-of-living concerns, while housing affordability remains constrained by limited supply, high mortgage rates, rising construction costs and the lock-in effect. Housing starts fell 2.6% in August to an annualized 1.275 million, and Capital Economics said elevated borrowing costs are likely to keep weighing on future construction.