Goldman Sachs: Global Mid-Term Capex Expectations Continue to Improve; Bullish on Tech and Grid

Overview

Goldman Sachs released an update on its Multi-Industry Capital Expenditure Tracker, covering 34 end markets and approximately 4,000 companies. The report states that global mid-term capital expenditure expectations are continuing to improve, with a projected CAGR for 2025-2029 of approximately 9% and a growth rate of 13% for 2026, both far exceeding the historical median of 2%. The core drivers of growth come from the strong structural demand in technology (specifically data centers and semiconductors) and utilities (power grids and power generation) sectors.

Core views

Overall Trend and Structural Divergence: Capital expenditure shows highly concentrated structural growth. Sectors related to data centers, semiconductors, and utilities are expected to account for 39% of total capital expenditure in 2026, compared to just 22% in 2022. In contrast, some traditional cyclical sectors face headwinds, such as significant downward revisions to capital expenditure expectations in the chemical and construction equipment industries, with the airport industry even expected to see negative growth (CAGR -4%) over the next five years. Technology Sector (Data Centers and Semiconductors): AI and computing power demand drive a substantial upward revision in technology sector capital expenditure. Data center CAGR 2025-2029 is revised up by 6.5 percentage points to 34.5%, with 2026 expenditure size expected to be 79% higher than historical peaks. Semiconductor industry CAGR expectation revised up by 6.8 percentage points to 23.1%, with 2026 expenditure expected to be 41% higher than historical peaks. Related capital expenditure-to-sales ratios and depreciation ratios are far above historical medians. Utilities (Grid and Generation): Energy transition and high energy consumption demands from data centers jointly drive a surge in power infrastructure investment. T&D field 2025-2029 CAGR is expected to reach 15.8%, while traditional generation field CAGR reaches 15.0%. Average age of utility equipment has significantly exceeded historical levels, combined with changes in capacity utilization, indicating rigid demand for grid modernization and expansion. Traditional Cyclical Sector Performance Mixed: Oil and gas industry capital expenditure expectations slightly revised up (CAGR 3.8%); equipment aging is severe but investment intensity remains below historical median; mining capital expenditure grows moderately (CAGR 5.5%), with copper mines expected up to 9.2% driven by new energy demand. However, telecommunications, consumer goods, and some transportation (e.g., aviation, rail) industries show relatively flat capital expenditure growth, with capital expenditure to depreciation ratios mostly at or below historical medians. Core Beneficiary Target Mapping: Based on capital expenditure trends, Goldman Sachs recommends European multi-industry targets highly correlated with high-growth end markets. Includes Schneider Electric (Schneider Electric, Buy, Target Price €264.30), a leader in data center power management; VAT Group (Buy, Target Price SFr654.20), a leader in semiconductor vacuum equipment; and grid cable giants Prysmian (Buy, Target Price €142.95) and Nexans (Buy, Target Price €146.60).

Analysis framework

The report constructs a bottom-up 'Multi-Industry Capital Expenditure Tracker Model', covering approximately 4,000 companies and €3.4 trillion in capital expenditure. The analysis framework not only examines absolute capital expenditure growth rates across industries but also introduces historical cycle adjustment mechanisms (distinguishing between up-cycle, down-cycle, and through-cycle) to eliminate forecast bias caused by macroeconomic fluctuations. Additionally, the report verifies the rationality and sustainability of capital expenditure growth by cross-comparing four core fundamental indicators: Capacity Utilization, Age of Equipment, Capital Expenditure-to-Sales Ratio, and Capital Expenditure-to-Depreciation Ratio. Furthermore, the report quantifies the correlation (R-squared) between specific companies' Organic Sales Growth (OSG) and corresponding industry capital expenditure indices to select beneficiary targets with high Beta attributes to the capital expenditure cycle.

Methodology notes

• Cycle & Sentiment FrameworkCapacity/Equipment Cycle (Juglar)

  Average Equipment Age and Replacement Cycle

  The report tracks the 'Average Equipment Age' across industries to find internal capital expenditure drivers. When average equipment age is significantly higher than historical median, it implies the industry has a strong physical replacement need, which typically triggers a new round of capital expenditure cycles (i.e., Juglar Cycle), e.g., oil & gas and utility sectors are currently in this phase.

• Company Fundamentals & Financial Framework

  Capital Expenditure Intensity Indicator Comparison

  The report uses two ratios, 'Capital Expenditure-to-Sales' (Capex/Sales) and 'Capital Expenditure-to-Depreciation' (Capex/Depreciation), comparing them against the industry median over the past 10 years. When these metrics consistently exceed historical median, it indicates the industry is not just performing routine asset maintenance but aggressively expanding capacity or upgrading technology, which is an important financial signal for determining if an industry is in a high-sentiment expansion period.

• Industry/Industrial Analysis Framework

  Through-Cycle Adjustment

  When forecasting capital expenditure, market consensus often becomes overly optimistic during economic up-cycles and overly pessimistic during down-cycles. The report adjusts forecast values via 'Through-Cycle Adjustment' by statistically analyzing deviations between market consensus forecasts and actual reported data over the past 20 years. This method filters out noise from short-term macro sentiment, more authentically reflecting long-term structural capital expenditure trends in the industry.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Schneider Electric

  Core supplier of data center power management and efficiency solutions, directly benefiting from surging data center capital expenditure.

  Strengths

  Large exposure to data center business (approx. 24%), products possess technical barriers.

  Risks

  Data center construction progress fails to meet expectations.

• VAT Group

  Leader in semiconductor manufacturing vacuum valves, benefiting from wafer fab capital expenditure expansion.

  Strengths

  Extremely high market share in semiconductor vacuum equipment (related business accounts for approx. 67%).

  Risks

  Cyclical fluctuations in semiconductor industry.

• Prysmian

  Leading manufacturer of global grid and communication cables, benefiting from grid modernization and renewable energy grid-connected investment.

  Strengths

  Large exposure to grid business (approx. 43%), sufficient order backlog.

  Comparison

  One of two oligopolies in the industry alongside Nexans.

  Risks

  Sharp fluctuations in raw material (copper, aluminum) prices.

• Nexans

  Provider of high-voltage submarine cables and grid transmission solutions, benefiting from offshore wind farms and grid expansion.

  Strengths

  High-voltage cable technology is leading (related business accounts for approx. 41%).

  Comparison

  One of two oligopolies in the industry alongside Prysmian.

  Risks

  Delays in offshore wind farm project approvals or construction.

Key data

• 2025-2029E Multi-Industry Capital Expenditure CAGRApprox. 9%Excluding data centers, approx. 5%, far above 2% historical median.
• 2026E Multi-Industry Capital Expenditure Growth RateApprox. 13%Excluding data centers, approx. 7%.
• Data Center Capital Expenditure CAGR (2025-2029E)34.5%Up 6.5 percentage points from March forecast; 2026 scale expected to be 79% higher than historical peak.
• Semiconductor Capital Expenditure CAGR (2025-2029E)23.1%Up 6.8 percentage points from March forecast; 2026 scale expected to be 41% higher than historical peak.
• Proportion of Structural Growth Sectors (2026E)39%Covering data centers, semiconductors, and utilities; was 22% in 2022.

Impact & implications

The focus of global capital expenditure is undergoing an irreversible structural shift; AI-driven tech infrastructure and energy transition-driven power networks have become the most certain growth mainlines. This means leading equipment suppliers and engineering service providers along the relevant industrial chains will welcome a long-term performance boom period. Conversely, capital spending willingness in traditional chemicals, construction, and telecom industries is relatively low, and relevant industrial chains may face pressure from weak demand growth.

Risks

• Slowing global economic growth leads enterprises to cut non-essential capital expenditure.
• High interest rate environment persists too long, increasing financing costs for heavy-asset industries and suppressing investment willingness.
• Actual implementation progress of data centers and new energy projects fails to meet expectations.
• Supply chain bottlenecks or critical raw material shortages lead to delays in capital expenditure projects.

What to watch

• Changes in capacity utilization of various end markets and actual implementation status of equipment replacement cycles.
• Latest capital expenditure guidance from hyperscale cloud service providers and semiconductor giants.
• Speed of promotion of EU/US grid upgrade and renovation and energy transition related policies.
• Financial statement performance of companies with high correlation between Organic Sales Growth (OSG) and capital expenditure cycle.