The limiting factor might be power supply. After nearly two decades of flat power demand, U.S. electricity use is expected to grow ~2.5% CAGR through 2030—about ~800 TWh of additional load this decade—roughly Texas’s and California’s combined annual generation. Data centers are the single biggest driver—about one percentage point of that 2.5% CAGR, nearly half of total growth.
And the United States is the epicenter. “Data Center Alley” (Northern Virginia) anchors a footprint that’s now ~45% of global data-center power demand. U.S. data centers are ~4% of total electricity use today and are set to approach ~9% by 2035. The pinch point is supply: Nine of 13 regional power markets are already in or near critical tightness for 2025; in five years, all but one are expected to sit below comfortable thresholds.
Bottom line: The capex super-cycle is intact, but power availability and interconnect timelines will pace it. We see opportunity in the picks-and-shovels: Utilities with load growth, grid and power suppliers, and AI enablers.
4. Europe: Stronger euro, new capex, defense momentum
Growth is modest and inflation has cooled, but the euro’s recent strength is a headwind for big exporters. As a rule of thumb, a 10% appreciation of the euro reduces EPS by approximately 4% for Europe’s 50 largest companies. That FX bite shows up first in guidance from globally exposed sectors—hence we like the domestic story (as Europe addresses some of its longstanding issues, less FX drag).
On the other side of the ledger, public policy is crowding in private investment—from energy grids and clean tech to semis and manufacturing. Think of the “Made in Germany” push: targeted incentives and guarantees spurring capex and rebuilding capacity. Those programs are fueling new orders and backlog, giving industrials multi-year revenue visibility even if near-term sales growth is modest. Many of these projects will ramp up in 2026.
Defense remains a clear bright spot. With multi-year budgets firming, we expect a potential step-up in guidance from several defense primes in the future as production scales and backlog converts.
Bottom line: A firmer euro is a drag for exporters, but capex tailwinds and defense demand will help balance the tape. Added plus: The 15% U.S. tariff on EU goods—well below earlier threats—will bring much-needed clarity, which should lift business and consumer confidence, and improve planning for 2025–2026.
5. China: Structural strains, tech upside taking shape
China’s economy has structural challenges, but the tech sector is a bright spot. July’s net new loans turned negative—the first monthly contraction in about 20 years—which means borrowers repaid more than banks lent, and a clear sign of weak private-sector credit appetite amid ongoing property stress.
The rest of the economic dashboard points the same way. Inflation was 0% year-over-year, home prices fell again (the declines are milder, but the downtrend isn’t broken), youth unemployment climbed and industrial output slowed, while manufacturing PMIs dipped below 50. The main driver: a negative wealth effect from the housing downturn and a softer labor market that’s keeping spending in check.
We’re a bit more optimistic on China tech. Valuations remain attractive versus global peers, the regulatory backdrop has stabilized, and the domestic AI stack keeps advancing—DeepSeek underscored that innovation can continue even with constraints. Tariff policies are more predictable, reducing planning risks for hardware and supply-chain companies. Select large platforms and infrastructure enablers with strong balance sheets and clear cloud/AI monetization strategies are well positioned, while sustained outperformance will likely require a more durable recovery in economic fundamentals and earnings.
We can help
As autumn starts to roll in, markets are juggling a Fed that’s leaning toward easing, profits that keep surprising, an AI capex wave running into power bottlenecks, Europe’s stronger euro offset by fresh capex and defense momentum, and China’s macro chill alongside a tech thaw. In other words, there are plenty of moving parts, but also plenty of ways to play them. The coming season brings both challenges and catalysts. Speak with your advisor to make sure your portfolio is ready for what’s on the horizon.
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