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Read our full analysis to understand how the AI investment wave connects to wood products demand and the 2026 housing market
The North American wood products market entered 2026 after a difficult year. In 2025, weaker housing starts, modest repair and remodeling activity and declining furniture production kept demand under pressure across major product categories. Now a less obvious force is shaping the market: a large wave of AI-related capital investment.
This is the second blog in our series on the three shocks affecting the wood products market. Here, we look at how AI capex connects to housing and wood products, comparing where the market stood in 2025 with what the 2026 market now shows.
In 2025, headline US GDP growth appeared solid. But the data tells a more nuanced story. Once you strip out swings in trade, inventories and government spending, between one-third and one-half of that growth came from data center construction. This raises questions about the health of underlying household consumption.
This is concerning, as demand across wood products was already weak heading into 2025. The entire wood products industry faced another year of declines, but varied by product type: structural products like softwood lumber and structural panels showed some resilience. More aesthetic or discretionary products that tend to fall towards the end of the build cycle like hardwood lumber and nonstructural panels faced bigger demand headwinds. While headline economic growth looked supportive on the surface, its clear that this growth is not benefiting the housing-linked end uses that drive wood products’ demand.
Now in 2026, the scale of AI spending is projected to accelerate significantly, with consensus estimates pointing towards around $600-700 billion in capital expenditure this year. The takeaway: this is no longer a side story for the wider economy and it carries direct relevance for housing.
AI capex affects wood products through the broader economy rather than through direct demand for lumber or panels. We have identified two transmission channels.
It keeps inflation and interest rates elevated. The AI investment wave is helping hold overall inflation and interest rates higher. For a market where housing depends heavily on financing conditions, that pressure flows straight through to demand.
It competes for real resources. AI investment is competing with residential construction for land, labor and capital, “crowding out” other sectors, including residential construction.
In practical terms, housing faces more than a demand issue. It also faces competition for resources from another large, capital-intensive sector. Home builders have already felt tremendous pressure on margins as home prices have leveled off, incentives have grown to attract wary prospective home buyers and input costs from tariffs and other market factors have squeezed profitability. With further pressure from the datacenter boom, home builders will likely cut production to focus on higher margin business rather than accept lower returns. Less residential construction activity—which accounts for about 70-80% of wood products demand—is obviously a negative development for upstream segments of the supply chain from timberland owners to mills to distributors to building material retailers.
The lesson here: Despite seemingly completely separate industries, the AI capex boom is tightening the macro backdrop and pushing goods inflation, construction costs and land values higher. This presents yet another headwind for cyclical, interest rate sensitive industries like wood products.
Our 2026 outlook hinges on a potential housing market recovery, but significant challenges remain. Key economic variables, heavily influenced by factors like AI investment, could create renewed headwinds for the industry.
While our latest forecast reflects this pressure, there’s a potential for a rebound in 2027—but it’s not without its conditions. The timing of this recovery could be slowed by the very forces keeping interest rates higher for longer.
The takeaway? Housing demand and resource competition are intertwined. The path to recovery isn’t straightforward.
To see our detailed projections and understand the specific conditions that will shape the market, download the full report.
One key signal to track is the pace of AI capital spending itself. Whether this extraordinary level of spending continues as expected will shape the interest rate and inflation picture, which will feed into residential construction activity. A slowdown in data center construction has the potential to free up some resources, like land and labor, which could then be used for residential construction. Data center construction drives a large portion of economic activity. A slowdown in this sector would coincide with an equity market correction and a negative wealth effect, so it would not be a purely positive story for housing.
A second indicator to watch is the source of economic growth. Are job and wage growth healthy enough to drive the US economy higher, or will the headline GDP continue to trend up due to a boom in the AI sector? In 2025, a significant portion of GDP growth came from data center construction. It’s important to see if this growth expands to other sectors or remains concentrated. A broader growth base would signal a healthier consumer economy, which is essential for supporting housing and renovation demand.
Both signals connect back to the same point: the more capital and labor pulled into data center construction, the more inflationary pressure residential building faces. That is one headwind to a faster housing recovery in 2026.
Comparing 2025 with 2026 shows a consistent thread. In 2025, AI-linked growth masked softer underlying demand. In 2026, the scale of AI spending grows, keeping inflation and interest rates elevated while competing with residential construction for resources. For wood products, the effect is indirect but real, reaching mill operators, wholesalers, building material dealers producers and other housing-linked segments through a tighter macro backdrop.
The question we must ask ourselves is this: if AI investment continues to compete for the same land, labor and capital as the housing sector, how quickly can a residential construction recovery truly take shape?
To explore how AI capex and the broader macro picture are shaping the 2026 wood products market, read our guide to the North American wood products market.