Remember when people said manufacturing was dead in America? Yeah, me neither – because right now it feels like the exact opposite is happening.
Walk into any industry conference these days and you’ll hear the same buzz: new semiconductor fabs breaking ground in Arizona, battery gigafactories popping up across the Midwest, electric-vehicle assembly lines going up faster than anyone thought possible. Add the insane pace of hyperscale data-center construction and the scramble to build new power plants, and you start to realize something big is underway. This isn’t just a recovery. It’s the biggest industrial investment wave most of us have ever seen.
And it’s going to cost us. Maybe a lot more than most investors currently expect.
The Scale of What’s Coming Is Hard to Overstate
Let’s start with the raw numbers, because they’re almost too large to feel real.
Analysts who track construction spending believe U.S. manufacturing facilities alone could see annual capital outlays top $250 billion in both 2026 and 2027. That would be roughly triple the levels we saw through most of the 2010s. And that figure doesn’t even include the data-center explosion or the power-generation projects needed to keep the lights on for all those servers.
When you layer everything together – chips, batteries, EVs, pharmaceuticals, steel mills, plus the concrete-and-copper hunger of AI data centers – you’re looking at a synchronized demand shock across almost every segment of the real economy. In my experience covering markets for the last fifteen years, I can’t remember anything quite like it. Even the fracking boom felt regional by comparison.
The Labor Squeeze Nobody Wants to Talk About (Yet)
Here’s the part that keeps me up at night: we’re already short roughly half a million construction workers nationwide. That gap existed before this new tsunami of projects hit the drawing board.
Now picture multiple $10–20 billion megaprojects landing in the same labor shed at the same time. Phoenix, Columbus, Atlanta – places that are already hot construction markets – are about to see bidding wars for electricians, pipefitters, and crane operators that will make the 2021–2022 wage spikes look mild.
I’ve spoken with contractors who are openly telling clients to budget 8–12% annual labor inflation for the next half-decade. Some are writing escalation clauses into contracts that would have been laughed at five years ago. And this isn’t just blue-collar trades. We’re talking project managers, commissioning engineers, quality-control specialists – the kind of talent that doesn’t scale overnight.
- Current U.S. construction workforce: ~7.6 million
- Estimated additional need by 2027: easily another 700,000–900,000
- Natural demographic replacement rate: nowhere close
- Immigration headwinds: still very real
The math is brutal. Wages are going up. Full stop.
Raw Materials: The Next Bottleneck You’ll Feel Everywhere
If labor is tight, commodities are about to get downright scarce.
Copper is the poster child. Data centers alone could drive global refined copper demand growth of 5–7% per year through the end of the decade. Throw in electrification of everything – EVs, heat pumps, grid upgrades – and the supply/demand balance looks terrifying. Inventories are already low, new mines take a decade to permit, and recycling can’t magically scale.
Steel, cement, specialty alloys – same story. Tariffs may protect domestic producers, but they also keep prices elevated for everyone building here. Equipment lead times for things like transformers and switchgear are stretching past 100 weeks in some cases.
“We’re telling clients to lock in material prices eighteen months ahead if they can. Anything less is rolling the dice.”
– Senior procurement officer at a major EPC firm, summer 2025
That quote isn’t hype. It’s the new normal.
Energy: The Hidden Mega-Trend Underneath It All
Perhaps the most under-appreciated piece of this puzzle is power. AI training clusters and hyperscale facilities are measuring their consumption in gigawatts, not megawatts. One large operator recently admitted a single new campus could rival the annual electricity demand of a mid-sized American city.
Across the industry, forecasts now show U.S. electricity demand growing 4–5% annually through 2035 – something we haven’t seen since the early 2000s. Natural gas plants, nuclear SMRs, solar-plus-storage – everything is getting fast-tracked. But permitting and interconnection queues remain massive chokepoints.
The result? Regional power prices are already spiking in places like Virginia and Ohio where data-center clusters are densest. Expect that phenomenon to spread.
What Does the Fed Do When the Economy Actually Runs Hot?
This is where things get really interesting for anyone who owns bonds or cares about real returns.
For years the Federal Reserve has been telling us it’s comfortable letting inflation run above 2% to make up for past undershoots. Now imagine genuine, broad-based resource constraints hitting at the exact moment fiscal policy is still pumping hundreds of billions into industrial subsidies.
The political incentives line up perfectly: strong wage growth feels great to workers, domestic manufacturing wins play well in every swing state, and higher nominal GDP quietly shrinks the real value of that $38 trillion federal debt mountain. From a purely Machiavellian perspective, a couple of years of 3–4% inflation might be exactly what the doctor ordered.
But for anyone holding long-duration fixed income? Not so much.
Investment Implications: Where the Opportunities (and Risks) Lie
I’m not here to predict hyperinflation or anything dramatic. Markets have a way of adjusting. But the risk/reward equation has clearly shifted.
- Real assets look attractive again – commodities, infrastructure, industrial real estate
- Pricing power matters more than ever – companies that can pass on cost increases without losing volume
- Short-duration fixed income – or better yet, floating-rate instruments – suddenly makes sense
- TIPS and inflation-linked bonds – the market may be underpricing breakevens for 2026–2028
- Domestic cyclicals over pure growth – think heavy machinery, electrical equipment, engineering firms
On the flip side, anything financed with long-term fixed-rate debt that can’t raise prices quickly – certain utilities, highly leveraged REITs, traditional telecom – could face meaningful pressure if yields rip higher.
The Bottom Line
America is finally doing what many of us have begged for since the 1980s: rebuilding its industrial base, bringing supply chains home, investing in the physical economy at scale. That part is unequivocally good.
But nothing this big comes for free. The combination of labor scarcity, commodity bottlenecks, and surging energy demand creates a classic late-cycle environment – the exact setup that historically births stubborn inflation.
The Federal Reserve can talk about “transitory” factors all it wants, but when structural constraints meet unlimited fiscal ambition, prices have a tendency to surprise on the high side.
So enjoy the boom. Celebrate the factories. Just don’t be shocked if your grocery bill – and your 10-year yield – look a lot higher in 2027 than most Wall Street forecasts currently suggest.
Sometimes the bill for progress arrives a little later than expected. In this case, I suspect it will come due right around the middle of this decade.
