“Climate change“ is certainly not “theoretical“ in the financial world and CapEx strategy. The climate has changed.
In the U.S., the strongest CapEx boom was the 1994–2000 period, with the peak concentrated in the late 1990s.
Why?
The AI boom may provide similar impetus to the late 1900’s “Internet” explosion, in categories one and two. But number three is getting scary, and likely to be a problem, for awhile. Wars tend to mess things up in the world, in many ways.
1) The internet created a massive new demand shock for fiber, switches, servers, and backbone networks.
2) Deregulation lowered barriers to entry and intensified competition, forcing firms to build fast or lose share.
3) Credit was abundant, and investors were willing to fund future growth with debt and equity, even before profits were proven.
The boom was broad enough to lift productivity and tech investment, even though it ended in overcapacity and a bust.
Changing technology could undercut the data center boom, just as Qualcomm changed the landscape of smart phones, dramatically. That is likely to happen again, in the AI world.
The long play needs to be considered carefully, as usual.
