Wells Fargo: AI spending is "spilling over" into the real economy, industrial stocks become the biggest beneficiaries but political resistance should be watched

According to Zhitong Finance APP, Wells Fargo strategist Ohsung Kwon recently pointed out that AI spending by tech giants is "trickling down" into the broader real economy, with industrial stocks set to be the main beneficiaries. This judgment is not mere ungrounded optimism—from macro data, corporate earnings, to policy battles, the spillover effect of AI investment is truly happening, though it is also facing mounting political resistance.

Spillover Effect Is Not a Slogan: Data Is Confirming It

Kwon's view is backed by solid data. According to Wells Fargo estimates, manufacturing activity in July expanded at the fastest rate in more than four years, non-AI related capital expenditures rose 10% year-over-year, and commercial and industrial loan growth also accelerated significantly. This year, the S&P 500 industrial sector has risen 20%, second only to energy and information technology.

A broader perspective confirms this trend. According to ConstructConnect data, in the first five months of 2026, the United States had started $58.1 billion worth of data center construction, more than four times that of the same period in 2025; first quarter starts hit $46.5 billion, up over 500% year-over-year. The AI boom has completely changed the U.S. economy, with hyperscale cloud service providers’ capital expenditures expected to reach about $750 billion this year. IDC forecasts that by 2026, global AI infrastructure spending will reach $497 billion, an increase of approximately 56% year-over-year.

Who is Benefiting? From Caterpillar to Vertiv Seeing Order Surges

The “shovel sellers” are reaping the first rewards. Caterpillar reported earnings on Tuesday showing data center construction has driven demand for power generation equipment and heavy machinery, with quarterly revenue surpassing $20 billion for the first time, up 24% year-over-year, while its Construction Industries segment sales rose 35%. The company promptly raised its full-year revenue guidance.

Data center infrastructure suppliers are also benefiting. Vertiv’s order backlog has exceeded $15 billion, with fourth-quarter orders surging 252% year-over-year; Eaton’s Electrical segment saw data center revenue grow about 50% year-over-year in the first quarter. Wells Fargo itself expects hyperscale cloud service provider capital expenditure to reach $1.1 trillion by 2027, about 25% above market consensus. Kwon estimates that about 40 hyperscale data centers are under construction in the U.S., with more than 100 in planning, mainly concentrated in Texas, Georgia, Virginia, and Pennsylvania.

Concerns: Political Resistance Is Becoming the Biggest Variable

However, Kwon clearly warns: “The biggest risk to data center construction is a political backlash, especially with midterm elections approaching.”

This risk is rapidly materializing. A Gallup poll showed 71% of Americans oppose building AI data centers in their communities, and 77% worry AI will push up electricity prices. In July this year, opponents launched 142 protests in 42 states nationwide. In the first quarter alone, local groups blocked or delayed 75 projects involving about $130 billion in investments.

There is even greater pressure on the policy front. In July, New York signed the nation’s first one-year moratorium on large-scale AI data centers; in at least 12 states, candidates for governor have expressed support for halting data center construction in the midterm elections. Tax incentives are also rapidly diminishing—four states have already canceled or paused data center tax breaks, while nine more are conducting studies. Based on a 7% sales tax, sourcing equipment for a single 1GW data center would add about $3 billion in costs.

The Trump administration issued the “Ratepayer Protection Pledge,” inviting tech giants to commit not to pass grid upgrade costs to residents, but the pledge is non-binding, and it remains unclear whether it can ease public backlash.

Wells Fargo’s assessment reveals an emerging reality: the dividends of AI spending are spreading from semiconductors and cloud service providers to traditional industrial sectors, injecting new growth momentum. However, the sustainability of this narrative increasingly depends not on technology or capital, but on politics—how the November midterm elections reshape the regulatory landscape for data centers will be the key variable determining how far the “trickle-down effect” can go. As Kwon said, we may still be in a “very, very early stage”—but it’s precisely the early stage when the most variables tend to emerge.