Recent AI-related volatility across risk markets mixes signal with noise. The more important task is to recognize that we are in a multiyear buildout and to invest with that sequencing in mind.
Bubble or not, AI is already causing profound economic change, and this is only likely to accelerate irrespective of the risks to its buildout over the short and long term. Particularly now that debt is part of the equation in financing capital expenditures, investors increasingly are applying the “dot-com” experience as a point of comparison and reason for caution.
Yet we continue to believe that analog—that AI would play out as a grand boom/bust cycle across a wide swath of tech companies—is too binary. Today’s AI capital cycle is more layered: established, cash-generative businesses are integrating AI into existing offerings; newer, more capital-intensive models are scaling; and a widening set of capital providers will share the claim on returns.
That mix lifts hurdle rates and demands greater investor discipline, but it also makes the system more resilient. The destination—aggregate returns on capital—will be uneven. The journey—investment, jobs, output and productivity—is already visible and underway.
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