Odd Lots · Monday, August 31, 2026
Richmond Fed President Tom Barkin stated that the significant construction investment cycle, driven in part by AI, is leading to shortages of critical materials like switchgears and transformers, as well as skilled labor such as electricians. He noted that while this AI-driven construction is booming, other sectors like multifamily housing are seeing declines, raising questions about whether AI investment is crowding out other industries due to increased costs.
“Yeah, so it's been a monumental construction investment cycle. $ 700 billion announced in one week, I think, at the beginning of February alone. And for sure, if you're trying to find switchgears or transformers or electricians, they are very hot and in very short supply. So there's no doubt in my mind that there are constraints being put on it.”
“Now, how much of that is crowding out, I think is a good question because when I talk to people in, let's say multifamily construction, they'll tell me you can't pencil it out and they want to talk about interest rates. And of course I say, well, is it really interest rates? Because we had the same interest rates in 04 and 05 and you're building lots of buildings. And then they'll acknowledge that construction costs are up and labor costs are up and they have to put more equity into projects and all that kind of stuff. And so it's more than that.”