Subject: Re: Cautionary Note on Growing CAPEX
"The AI revolution has reached a key inflection point, with the largest U.S. tech firms embarking on a massive AI infrastructure buildout. While the market has rewarded this spending so far, we find that historical capital expenditure booms have typically resulted in overinvestment, excess competition, and poor stock returns both at the macro and individual firm level. With the AI arms race transforming Big Tech from asset-light to asset-heavy, a model we find associated with inferior returns, our value-based playbook suggests rotating toward a broader set of AI beneficiaries with lower capital requirements and valuations."

This is one of the things that mirrors the dot.com bubble - the overbuilding of infrastructure

https://ideas.ted.com/an-eye-o....


Before the bubble burst, telecom companies raised $1.6 trillion on Wall Street and floated $600 billion in bonds to crisscross the country in digital infrastructure. These 80.2 million miles of fiber optic cable represented fully 76 percent of the total base digital wiring installed in the United States up to that point in history and would allow for the maturation of the internet.

And because of a resulting glut of fiber in the years after the dot-com bubble burst, there was a severe overcapacity in bandwidth for internet usage that allowed the next wave of companies to deliver sophisticated new internet services on the cheap. By 2004, the cost of bandwidth had fallen by more than 90 percent, despite internet usage doubling every few years. As late as 2005, as much as 85 percent of broadband capacity in the United States was still going unused. That meant as soon as new “killer apps” were developed, there was plenty of cheap capacity allowing them to roll out to the masses. The tracks, as it were, had already been laid.

tecmo
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