During the pandemic era, the Biden administration launched several large-scale stimulus programmes to reinvigorate the US economy and fortify its competitive edge. Some investors predicted a potential US$1.4 trillion US capex super cycle that would generate investment tailwinds for decades to come.

With several of these ambitious projects already scaled back, what does the return of Donald Trump mean for US capex in key areas of the energy transition, semiconductor manufacturing and industrials more generally?

Energy transition

Among the key beneficiaries of a US capex boom, the energy transition is facing the most uncertainty under a Trump administration. President Trump’s initial executive orders included halting new permits for wind projects, pausing the distribution of unspent government funds for electric vehicle (EV) charging infrastructure and prioritising the use of fossil fuels.

While these orders are likely to create an overhang for many solar, wind and EV-related companies, some of our investment professionals believe the withdrawal of government concessions could be beneficial in flushing out weaker companies that are overly reliant on subsidies or tax credits. This could potentially leave stronger brands such as Tesla in the EV space to emerge even stronger.

In addition, the energy transition impacts a wide range of industries like power, construction and buildings. These industries are intricately linked to President Trump’s reindustrialisation ambitions and are therefore likely to face less scrutiny. Other areas within the energy transition value chain that may also emerge relatively unscathed are nuclear, hydrogen, and carbon capture and storage (CCS) solutions as they have previously received Republican support.

Industrials

A substantial proportion of US capex investment is to be directed toward developing infrastructure, manufacturing and onshoring of global supply chains. Capex investment in this space potentially benefit various industrial-related companies, including those in construction and machinery (Caterpillar), building products (Carrier Global) as well as electrical equipment and automation providers (Schneider Electric). These investments bring renewed attention to cyclical, old-economy industrial businesses that have largely been overlooked by investors for many years.

Several Capital Group economists anticipate that domestically focused industrial companies will continue to benefit from robust US government capex support, as they are in-line with President Trump's nationalistic and reindustrialisation agenda. The latter is expected to drive job growth, ensure economic independence and secure supply chains, especially within critical industries. As a result, legislative bills like the Infrastructure Investment and Jobs Act (IIJA) and Creating Helpful Incentives to Produce Semiconductors (CHIPs) are likely to face less opposition than the Inflation Reduction Act (IRA) as they align better with Republican goals of promoting US industrial independence.

Aside from capex, some analysts suggest that US industrials might experience additional benefits due to plans for deregulation. They believe this could result in faster permits for infrastructure projects, a shift in energy policy favouring fossil fuels (increased use of pipelines and thermal coal), higher US defence spending, more onshoring, and possibly a more accommodating Federal Trade Commission (FTC), potentially leading to increased acquisition activity.