Paul Enright(@pmje73):I think this recent volatility continues to reflect the misalignment in the product cycle and the capital cycle. The product cycle itself has gotten more complex not simpler due to the continued presence of multiple competing products and the shifting relevance of open and closed models. The capital cycle is adding complexity on the other side of complexity proving two things can be true. The market can be structurally under supplied compute/infra but the capital complexity to finance the build may be over extended and overly complicated. I observe a lot of frustration about this dynamic. If you are super bullish long term this should be great. I think the issue is people are more bullish about the economics caused by the under supply than perhaps their bullishness on the underlying unit economics of the products on the other side of the shortages. The frustration is driven by not getting/keeping a sustained multiple now on the current economics reflexively driven by the supply/demand imbalance. I wont pretend to know what’s going to happen to alleviate supply or not, or what the economics of the models will look like depending on the slope of supply. I just know this kind of uncertainty usually leads to volatility because the market hates uncertainty more than anything. That means being nimble. Just when you think there is a clear trend, something else will change and make you re-think everything you believe today.

2026.10.17 11:08

I think this recent volatility continues to reflect the misalignment in the product cycle and the capital cycle. The product cycle itself has gotten more complex not simpler due to the continued presence of multiple competing products and the shifting relevance of open and closed models. The capital cycle is adding complexity on the other side of complexity proving two things can be true. The market can be structurally under supplied compute/infra but the capital complexity to finance the build may be over extended and overly complicated. I observe a lot of frustration about this dynamic. If you are super bullish long term this should be great. I think the issue is people are more bullish about the economics caused by the under supply than perhaps their bullishness on the underlying unit economics of the products on the other side of the shortages. The frustration is driven by not getting/keeping a sustained multiple now on the current economics reflexively driven by the supply/demand imbalance. I wont pretend to know what’s going to happen to alleviate supply or not, or what the economics of the models will look like depending on the slope of supply. I just know this kind of uncertainty usually leads to volatility because the market hates uncertainty more than anything. That means being nimble. Just when you think there is a clear trend, something else will change and make you re-think everything you believe today.

Paul Enright@pmje73

2026.09.17 12:14

The equity market has had a fifteen year tailwind of declining capital intensity, lower cost of debt, and higher margins fueling a debt and fcf driven equity shrink support to eps and multiples. There is a generation of investors now that have not had to think much about capital intensity, capital cycles, return on capital, tightening liquidity. Everyone is in agreement that AI is the most important thing. And AI can dramatically dwarf the capital cycle but the point is that this isn’t just about AI it’s AI vs the capital cycle. And the capital cycle can lose and the market can be fine. But if the capital cycle wins the equity market resets. The right tail is limited and somewhat reflexive based on whether AI would be purely additive or substitutive. The belly of the distribution curve of outcomes seems normal and the left tail seems increasingly fatter.

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