What feels underappreciated is how much of this comes down to sequencing. In most capital cycles, returns do not emerge in line with investment, and rarely accrue evenly across participants.
The risk is less that AI fails, and more that capital, accounting and cash flows become misaligned - making both optimism and scepticism look more certain than they really are.
This essay gives structure to what many sense: the numbers don't add up, and accounting hides it. The depreciation wave will hit all hyperscalers at the same time, leaving no diversification for index investors. The $800B revenue math is likely understated, since AI's compute costs break software's high-margin model. And history agrees: the internet changed everything, yet Cisco still trades below its 2000 peak. Subsidized demand always rationalizes once real prices arrive, and Uber's blown budget is what the top of that curve looks like. Musical chairs, indeed.
Business must be the only environment where people hear the word “disruption” and they think its good. What I see is increased competition. It's not about whether AI capex makes financial sense, it's about whether you fall behind or stay ahead.
I remember people saying a while ago that this time is different because compared to 2000 those companies are massively profitable and large. Well guess what? 3 money losing IPOs at eye watering valuations, Alphabet raising equity and issuing a 100 year bond, the mag 7 is spending at least 90% of operational cash flows and expecting to spend more…
Schumpeterian creative destruction is arguably a good thing. It is the way in which the corporate landscape evolves. Survival of the fittest in Darwinian parlance.
Strong framework.
What feels underappreciated is how much of this comes down to sequencing. In most capital cycles, returns do not emerge in line with investment, and rarely accrue evenly across participants.
The risk is less that AI fails, and more that capital, accounting and cash flows become misaligned - making both optimism and scepticism look more certain than they really are.
This essay gives structure to what many sense: the numbers don't add up, and accounting hides it. The depreciation wave will hit all hyperscalers at the same time, leaving no diversification for index investors. The $800B revenue math is likely understated, since AI's compute costs break software's high-margin model. And history agrees: the internet changed everything, yet Cisco still trades below its 2000 peak. Subsidized demand always rationalizes once real prices arrive, and Uber's blown budget is what the top of that curve looks like. Musical chairs, indeed.
Business must be the only environment where people hear the word “disruption” and they think its good. What I see is increased competition. It's not about whether AI capex makes financial sense, it's about whether you fall behind or stay ahead.
I remember people saying a while ago that this time is different because compared to 2000 those companies are massively profitable and large. Well guess what? 3 money losing IPOs at eye watering valuations, Alphabet raising equity and issuing a 100 year bond, the mag 7 is spending at least 90% of operational cash flows and expecting to spend more…
Schumpeterian creative destruction is arguably a good thing. It is the way in which the corporate landscape evolves. Survival of the fittest in Darwinian parlance.
Good for the consumer, yes. They will capture 98% of the value.
The focus on who wins misses the bigger picture—how to ensure AI investments actually create lasting value. The real question isn't just about dominance, but about converting demand into sustainable cash flow. https://fungalstockecosystem.substack.com/p/ai-stocks-need-a-better-question