| |
| Managing Editor’s Note: Today, Near Future Report senior analyst Nick Rokke dives into the One Big Beautiful Bill Act… |
| As Nick notes in today’s issue, most of the commentary surrounding the Act has been too fixated on political optics to realize the sheer impact it will have on U.S. industrial, oil & gas, biotech, and most importantly… AI infrastructure. |
| And how it’s going to help the U.S. win the AI race. |
| The Biggest Winner in the One Big Beautiful Bill Act |
| By Nick Rokke, Senior Analyst, The Near Future Report |
| |
| The largest tax bill in history has just been passed by the U.S. Congress. |
| They’re calling it the One Big Beautiful Bill Act (OBBBA). President Trump signed it into law shortly after. |
| Most are too busy arguing about deficits and political optics to see the bigger picture. They’re missing the forest for the trees. |
| As analysts, we’re focused on the impact that the bill will have on the economy and the markets. And specifically, we’re paying close attention to the bill’s $12.5 trillion worth of tax provisions. |
| That’s a $12.5 trillion realignment of U.S. industrial and technological policy. In effect, the federal government is now utilizing the tax code to reshape global capital flows, re-industrialize the United States, and win the race for artificial intelligence (AI). |
| The Cold War was won with nuclear weapons and currencies. The next global contest will be decided by data centers, semiconductor manufacturing, and energy production. And the OBBBA just handed American companies the financial firepower to outbuild, outspend, and outscale their global rivals. |
| Forget the political talking points. Just follow the money. |
| This bill doesn’t benefit every sector equally. It targets key industries. Particularly, U.S. industrial, oil & gas, biotech, and most importantly… AI infrastructure. |
| This is where the incentives are. And where the capital will go. |
| Money Follows the Incentives |
| The OBBBA is 330 pages of dense legal and tax code. But beneath the jargon lies a single, powerful lever – accelerated depreciation. |
| To many investors, depreciation likely sounds like accounting mumbo jumbo. It isn’t. |
| Depreciation determines how fast a company can write off the cost of its capital investments. And when you’re dealing with multibillion-dollar infrastructure projects – factories, oil pipelines, drug research, AI hardware – depreciation can be the difference between no taxes and high taxes… between expansion and contraction. |
| Under the old rules, capital assets were written off slowly, over decades. A $2 million factory with a 20-year productive life would only allow companies to write off $100,000 a year… Even though they spent the money upfront to build the factory. |
| But under this new law, businesses can now immediately expense 100% of the cost of “qualified production property.” |
| This category includes newly constructed non-residential real property like factory buildings used for manufacturing, production, or the refining of tangible personal property in the United States. |
| That means the entire $2 million, from the example used earlier, can be deducted from taxable income right away… Not over decades. |
| This is a huge benefit for companies that are domiciled in a high-tax-rate state and have businesses that require high levels of capital expenditures. |
| By increasing the amount of depreciation, instead of expensing $100,000 of the factory depreciation against income, now the company can expense $2 million. That will reduce the profits they have to pay taxes on by $1.9 million. |
| And for every $1 million of accelerated depreciation a company can write off, at the highest corporate tax rate of 21%, a company saves $210,000. |
| Take Tesla (TSLA), for example. The company is investing $8 billion this year to expand its U.S. factories to increase production of EVs, batteries, and its Optimus humanoid robots. |
| Under the old system, Tesla would have to slowly expense these costs against profits over decades. Under the new law, it can write off the entire amount upfront – saving them as much as $1.6 billion in taxes this year alone. |
| That’s real cash Tesla can reinvest today rather than waiting 10 or 20 years to reclaim it on the back end. |
| And that’s just the start. Not only can the factory building be expensed immediately, but so can any qualified property, including equipment and machinery. |
| This “reshoring super-deduction” dramatically lowers the after-tax cost of domestic investment. This should encourage the onshoring of supply chains and manufacturing capacity and create more jobs for Americans. |
| These incentives have sent industrials stocks soaring 30% since the April 8 bottom. That outperformed the S&P 500 Index by 4 percentage points. |
| |
| While this bill offers clear benefits for U.S. industrials, there’s one sector that stands to gain even more… |
| Artificial Intelligence Is the Biggest Winner |
| We’re amid the largest capital expenditure buildout ever. In fact, it’s the largest infrastructure buildout in history. |
| The hyperscalers – Amazon (AMZN), Microsoft (MSFT), Google (GOOGL), and Meta (META) – are racing to build out AI data centers, what we now call AI factories. And this infrastructure buildout is accelerating. |
| |
| In just three years, this buildout is expected to reach over $1 trillion per year. And no matter who builds the data center, the advanced semiconductors inside are nearly all produced by one company – Taiwan Semiconductor Manufacturing Company (TSM). |
| TSM is spending over $165 billion to expand its chip fabrication capacity in the U.S. And under the new law, it will be able to expense many of those investments upfront – reducing taxable income in the short term and improving short-term cash flows. This is a large incentive considering the size of these upfront capital expenditures. |
| Subscribers of our Near Future Report large-cap-focused advisory have held TSM since November 2023 and are currently up more than 150%. |
| Now, the language in the OBBBA is still a little vague when it comes to whether entire data center structures qualify for immediate expensing. After all, they aren’t “refining tangible property.” But what is clear is that the hardware inside qualifies. |
| This includes the most expensive parts – the GPUs, networking chips, and AI accelerators – which account for roughly half the cost of a data center. |
| With new data center costs reaching into the tens of billions of dollars, the short-term tax savings are enormous. Let’s say only 25% of the cost is fully depreciable… That’s $2.5 billion per new hyperscale data center that can be immediately written off. |
| Comparatively, if they had to expense it over five years, they could only write off $500 million a year. The $2 billion increased write-off will likely save these companies $400 million in taxes the year this is spent. |
| This change alone frees up billions in cash flow for the hyperscalers. And that cash will almost certainly be reinvested into even more compute infrastructure. |
| But the OBBBA didn’t stop there… |
| Recommended Links Elon’s $12 Trillion Apology to Trump Musk and Trump’s relationship is far from over. In fact, according to tech legend and angel investor Jeff Brown… It looks like Elon is about to provide Trump with a breakthrough new piece of tech. One that could kickstart a $12 trillion manufacturing revolution… And make a lot of people rich in the process. Click here to see the details before everyone catches on. Jeff Brown’s Big Discovery in Washington, D.C.:
“Beginning July 25, Trillions Could Flood These Tiny Cryptos” Thanks to Congress and the White House, a trillion-dollar tsunami could hit a corner of the crypto market… beginning July 25. President Trump calls the plan “incredible.” And once you see how to get in front of it, you will too. Already, small plays are jumping as much as 300%, 318%, 520%, and even 600%. For a limited time, Jeff Brown is sharing everything. Details here. |
|
| An Innovation-Forward Mindset |
| Another critical change was allowing companies to deduct 100% of their research and development (R&D) costs. |
| Since 2022, companies have had to amortize R&D expenses over five years – a major setback for innovation-focused firms. Imagine spending cash on breakthrough research… but still owing taxes on “phantom” profits because you couldn’t deduct those expenses. |
| It was, in effect, a tax on innovation. That burden has now been lifted. This is a huge win not just for Big Tech companies but also for AI startups. |
| OpenAI, Anthropic, Perplexity, and the next wave of early-stage innovators can now deduct their research expenses in full. |
| It’s no coincidence that we’re seeing the biggest players throw around enormous paychecks to secure top AI talent. They can now write off these R&D expenses immediately. |
| Look at Meta. CEO Mark Zuckerberg has been offering $100 million paydays to the most skilled software engineers. And don’t forget the $14.3 billion investment into Scale AI, bringing 28-year-old founder Alexandr Wang into Meta’s new Superintelligence Lab. |
| And Google just paid $2.4 billion to Windsurf – a California-based AI code editing startup – with intentions to license Windsurf’s tech and absorb its top talent. |
| Even outside AI, these incentives are reinvigorating sectors like biotech. U.S.-based CRISPR companies – which will be huge beneficiaries of these AI advancements – are seeing renewed momentum. That’s why the ARK Genomic Revolution ETF (ARKG) is up 36% since its bottom about three months ago. |
| |
| The message is clear: more compute, more R&D, and more capital are being deployed in the race for AI dominance. |
| The Ultimate Winner: NVIDIA |
| At the center of it all is NVIDIA (NVDA). |
| Thanks to the OBBBA, its customers can now fully deduct the cost of NVIDIA’s high-end GPUs in year one. That makes these essential chips more affordable, and it creates a bigger budget to buy even more. |
| It’s a powerful flywheel: More tax savings mean more spending… which means more GPUs… and more growth for NVIDIA. |
| That’s a big reason why NVIDIA’s shares are hitting new highs. Its market cap has now crossed $4 trillion. And with Monday night’s news that NVIDIA can continue selling its H20 chips to China, its demand story just got even stronger. |
| So, how high can NVIDIA go? |
| We believe $250 a share is in reach. And it could move even higher before this AI bull market runs its course. |
| |
| The OBBBA isn’t perfect. But it’s clear about one thing. America is open for business – especially in high-tech manufacturing and AI. |
| Much of that spending will go to AI data centers. |
| Last year, $435 billion was spent building out AI infrastructure. That number is expected to more than double, hitting $1 trillion annually by 2028. |
| We’re still in the early innings of this transformation. And the companies supplying the tools, chips, and services behind this AI revolution will be the biggest winners, just like NVIDIA is today. |
| Capital is flowing. The incentives are in place and they’re absolutely massive. The AI race is on. And the winners are becoming clear. |
| For investors who are positioned correctly, this megatrend will unlock some of the biggest gains of the decade. |
| Stay invested. Stay focused. The best is yet to come. |
Nick Rokke
Senior Analyst, The Near Future Report |
| |
