This is an absolutely phenomenal analysis of the AI capital spending cycle! The comparison to railroads and telecom bubbles is incredibly insightful. The stat that firms ramping capex have historically underperformed by -8.4% annually is eye-opening. What's particularly alarming is Meta, Microsoft, and Alphabet spending 21-35% of revenue on capex - more than utilities and even AT&T at the telecom bubble peak. The prisoner's dilema framework perfectly captures why the Magnificent 7 can't back down despite the obvious overinvestment risk. Your point about the real winners being the early adopters (like Netflix benefiting from cheap bandwidth) rather than infrastructure builders is brilliant. The circular financing deals with Nvidia-OpenAI are indeed eerily reminiscent of dot-com era excesses. Thanks for sharing Kai Wu's research - his intangible asset focus is exactly the right lens for valuing modern tech.
Kai really does phenomenal work. I HIGHLY recommend his firm and his research. He cut his teeth in the business working for Jeremy Grantham, who is something of a hero to me in this line of work.
This is an absolutely phenomenal analysis of the AI capital spending cycle! The comparison to railroads and telecom bubbles is incredibly insightful. The stat that firms ramping capex have historically underperformed by -8.4% annually is eye-opening. What's particularly alarming is Meta, Microsoft, and Alphabet spending 21-35% of revenue on capex - more than utilities and even AT&T at the telecom bubble peak. The prisoner's dilema framework perfectly captures why the Magnificent 7 can't back down despite the obvious overinvestment risk. Your point about the real winners being the early adopters (like Netflix benefiting from cheap bandwidth) rather than infrastructure builders is brilliant. The circular financing deals with Nvidia-OpenAI are indeed eerily reminiscent of dot-com era excesses. Thanks for sharing Kai Wu's research - his intangible asset focus is exactly the right lens for valuing modern tech.
Kai really does phenomenal work. I HIGHLY recommend his firm and his research. He cut his teeth in the business working for Jeremy Grantham, who is something of a hero to me in this line of work.