The current AI frenzy is attracting astonishing levels of technological investments, to the extent that capital expenditure has become the main driver of American growth in recent times.

The Peterson Institute for International Economics and McKinsey’s report give us both a “yes” and a “no.” There are at least four key points to note regarding foreign direct investment (FDI):

Even considering the massive capital commitments recently made by major tech companies—amounting to $300 billion from Amazon, Meta, Microsoft, and Alphabet alone—this is nowhere near $8 trillion.

Therefore, “the United States has clearly become a destination for investment as much as it is a source of foreign direct investment.” To be fair, this trend began before this administration.

Joe Biden’s Inflation Reduction Act has triggered a remarkable investment boom, especially in green technology manufacturing, which Trump is now partially dismantling. Yet, Biden remains determined to attract growth from the rest of the world, particularly Europe.

However, McKinsey believes that Western investment in China has dropped by 70% since 2022. The ratio of incoming to outgoing investments also fell to 30% during Trump’s era—meaning China “now exports much more foreign direct investment capital than it attracts,” according to FDI calculations, reflecting geopolitical realities.

Western countries invest in each other, while China invests in non-Western markets (and to some extent in Europe). In short, friends clearly stick together.

Consequently, “FDI projects announced since 2022 could quadruple current battery production capacity outside China, nearly double the global data center capacity powering AI, and bring the U.S. into the circle of leading semiconductor producers,” which is causing much concern.

Worse yet, valuations of companies like Nvidia and OpenAI are rising due to dangerous circular financial flows. This exacerbates the risk of a market crash in the future, which could lead to a decline in investment commitments.