Capital expenditure (capex) is expected to play a significant role in driving business momentum, according to a recent analysis from Morgan Stanley Investment Management. The firm’s leadership sees potential for widespread effects from increased corporate investment.
“We think the network effects of greater capital expenditure will be vast, both for the companies investing in their businesses and those downstream who generate more business as a result,” said Aaron Dunn and Brad Galko, Managing Directors and Co-Heads of the Value Team at Morgan Stanley Investment Management.
The report notes that corporations often face uncertainty when making decisions about investments. In 2025, this uncertainty has been heightened by structural changes introduced by the new U.S. Administration alongside ongoing economic concerns. These factors have contributed to hesitation among corporate leaders regarding major capital commitments during much of the year.
Capex remains essential for businesses aiming to stay competitive. Reinvesting cash flow helps companies maintain and grow their assets, which can create shareholder value if returns on investment exceed costs. Additionally, increased capex supports the wider economy by generating demand for capital goods providers, supporting employment and earnings.
The technology sector, particularly internet services firms engaged in artificial intelligence (AI), has continued its spending despite these uncertainties. According to Morgan Stanley Investment Management’s analysis, these companies benefit from strong cash flows and solid balance sheets while fueling further growth across related industries such as steel manufacturing, power solutions development, and utilities expanding capacity to meet rising energy needs from data centers.
This trend is not limited to technology alone. Other sectors are also anticipated to raise their capex in the latter half of 2025 as structural and economic uncertainties begin to settle. On average, capex spending across industries is projected to increase by 8% in 2025 compared with previous years.
Morgan Stanley Investment Management expects executive confidence to strengthen as U.S. policy stabilizes and tax reforms take hold during the second half of the year. This improved outlook could provide lasting benefits for both those investing in capex and businesses that supply them.
Dunn and Galko emphasized: “While uncertainty has defined the first half of 2025, we believe companies are adjusting to the new era of tariffs, trade and tax reform—and are refocusing on their long-term business plans.”
They reiterated that outcomes may differ between sectors: “Certainly, capex business reinvestment will not be equal across all sectors. That’s why bottom-up, fundamental investing with deep company analysis is essential to identifying the most promising, forward-looking companies and investment opportunities.”
The report includes standard risk disclosures about volatility in equity markets and cautions that there are no guarantees any particular strategy will succeed under all conditions. It urges investors to carefully consider objectives and risks before committing capital or pursuing specific strategies.
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