Beyond the AI Box: how today’s AI buildout is reshaping returns on capital
Artificial intelligence is driving one of the most capital‑intensive investment cycles in technology history. As spending accelerates, investors face a more nuanced question: how does rising capital intensity reshape the economics of growth?
History does not repeat, but it can rhyme. There are faint signs of a repeat of the tech bubble from 2000.
There have been several headlines about the disruption of AI on various industries – these span from decimation of the Software businesses to Wealth Management firms to data providers to logistics firms.
Divergence Within the Technology Sector
For instance, evaluating the performance of the software sector ETF, IGV, relative to that of the semiconductor sector ETF, SMH, there is approximately 80% difference in performance
between these broad-based technology sub-sectors over the last 12 months – a divergence amongst two important areas of technology we have not seen in recent years.
Generative AI tools such as ChatGPT, Copilot and Claude are proliferating in software development but we see the promise still being ahead of reality. Productivity gains and adoption coexist with hype, skepticism and interaction challenges.
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