Artificial intelligence is driving technological disruption and economic transformation. It is a unique opportunity and, like PCs, the Internet, mobile, and cloud computing before it, AI is driving a new supercycle.
It’s Still Early
There’s a significant technology trend every 10 years or so, from PCs to mobile internet to cloud, and now AI. Fundamentally, AI is a substantial wave that is beginning to swell into a larger one.
AI will enable massive winners this decade, similar to how NVIDIA has risen 450 times since 2010 and Apple over 250 times since 2000 (with Google, Amazon, and Meta also rounding out this list). Now, with the technology sector likely to grow to 75% of the U.S. market cap from under 50% today, it’s AI’s moment to drive wealth creation.
Disrupters are Disrupted
The top 25 technology companies, by value, turn over by 25% to 33% every five years. The market is relentless in eliminating the deadweight and allowing the best companies to rise to the top. No disruptor is safe. However, sustained winners generate continued outsized returns over the long arc of the supercycle.
Previous winners, including Nvidia, Apple, Google, Amazon, and Meta, are well-positioned. However, that does not mean these companies are safe in the new supercycle; they do, however, have a significant advantage. However, new winners will emerge, and some previous winners will fall behind.
Value and Volatility
Be long innovation. Brace for volatility.
The Nasdaq 100 has easily outperformed the Dow Jones Industrial Average over the last four decades with a 15% annual return versus 12%, respectively. However, tech investors must hold through larger drawdowns. Nvidia shareholders have experienced 50% declines seven times since its IPO, and the Nasdaq fell 78% during the dot-com selloff.
The biggest mistake investors make is selling too soon or failing to hold during periods of volatility and significant drawdowns. Value creation takes years, and sometimes decades. The winners compound their winnings over time. Choosing innovation during economic transformation has proven to be a consistent winning strategy. The losing strategy is to take the chips off the table or believe that the value creation cycle has ended.
The market moves quickly, and the mix of winners can change, but the long-term cycle will create long-term investment opportunities.
Capex is a Strategic Weapon
Large technology companies continually increase their AI infrastructure budgets to expand data centers and acquire chips for training and serving AI models.
The 2025 consensus forecast for Big Tech capital expenditures has risen from $152 billion in 2021 to $213 billion in January 2024, to $310 billion in January 2025, and to $365 billion today. It’s not just bullish for AI, but a substantial competitive advantage, creating a sustainable edge for incumbents.
AI will be sustainable and permeate all aspects of the economy. Its benefits and economic value are only just beginning (an example is the surge of AI chatbots from both enterprises and consumers). Still, the foundation and infrastructure are being built out rapidly.
New Hyperscalers
AI will open up opportunities for new cloud computing players that specialize in AI. The allocation of GPUs from Nvidia is a significant development and will serve as an indicator for future cloud revenue.
For 2025, Nvidia will sell 11% of its GPUs for the cloud computing market to CoreWeave and another 19% of its GPUs to Oracle. These are potentially significant and sustainable opportunities. If there is an AI war, follow the (Nvidia GPU) bullets. This is one example of an inexorable trend that will continue.
Global Competition
AI competition is global. The US cannot put a stranglehold on its distribution (Amazon, Microsoft, and Google offer China’s DeepSeek). US performance is superior, but the Chinese offer almost the same performance at lower costs. Fracturing AI between US and Chinese systems is costly and inefficient. Economics should win, not geopolitics.
The U.S. has two unassailable advantages: Wall Street and Silicon Valley. Access to capital, competitive markets, liquidity, and global reach combine for a winning formula. American technology companies account for 75% of the sector’s global market cap. Additionally, 60% of the world’s AI researchers reside in the U.S., and no other country has a comparable concentration of engineering talent and world-class universities.
China is no slouch. They are graduating more engineers, and it is part of a national initiative to become the world’s leader in artificial intelligence. This formidable competition benefits the global economy if competition is allowed to develop freely. Geopolitics is interfering with and preventing this healthy competition and even beneficial collaboration. Despite this, while it is a global game and countries from the Middle East, Europe, and elsewhere are vying for a “local AI” presence, China’s models and offerings will be competitive; however, the US remains in pole position.
Disruption and Transformation
A new supercycle in artificial intelligence is underway, driving exponential technological disruption and economic transformation. This supercycle is fundamentally reshaping industries, business models, and workforce structures at a rapid pace, with AI projected to contribute up to $15.7 trillion to the global economy by 2025. It’s still early.
Unlike previous technological revolutions, the current transformation is exponential, creating new industries and markets and impacting existing economic structures, costs, distribution, and employment. While productivity and economic growth are expected to surge, the most significant opportunity arises for capital owners, and therefore, investors.
AI will be the most significant economic catalyst of the 21st century, fundamentally altering how we work, innovate, and create value.