What I read this week
2 November 2025
Surviving the AI capex boom
https://blog.sparklinecapital.com/wp-content/uploads/2025/10/sparkline-ai-capex.pdf
Large US tech firms are on track to spend $400bn this year alone (Meta, Google, Amazon and Microsoft)
Bain estimates that $2 trillion in annual revenues are needed by 2030 to justify these costs
Current ChatGPT revenue is at $20bn so 100x in terms of monetisation
There are issues with these estimates being so far ahead and fuzzy.
We have other driving forces resulting in higher consumption which is the Jevon’s paradox
But the compression in cost and potential efficiency gains in algorithms will push these down
Capital Cycles in the past have more frequently shown boom and bust
US Railroad stocks
US Telecom stocks
It’s very difficult to estimate DEMAND in time as an investor
Steer clear of capex boom companies trading on continuation of forward multiple expectations
AI Prisoner’s Dilemma
If any new player goes All-In the others must follow suit and capital wastage is collateral damage
Infrastructure captured very little of value that was created. The value accrued to applications and consumers.
In the dot com bubble telecoms laid 80 million miles of fiber optic cable. 85% of these cables remained unused and the cost of bandwidth fell to 90%.
Eventually the dark fiber ended up being consumed - but it wasn’t until the post 2010 period
Succinct Communication
Shiller PE Ratio
The Shiller PE ratio takes the PE by averaging the earnings for the S&P over the last 5 years (inflation adjusted) and comparing it to the price of the current market. It’s reaching levels close to the 2000s. When companies are trading high on PE there is a lot of forward growth expectation built into the multiples.
In search of long-term thinking
Cheeky Pint with Dan Sundheim D1 Capital
Dan makes two stock recommendations to look into.
Clean Harbors Inc Thesis
The company specialises in hazardous waste disposal and industrial services for commercial clients. The essence of his investment thesis covers:
Asset base that is difficult to replicate - incinerators are heavy industrial assets which are challenging to establish in the market given environmental and social factors
Established supply chain is complex with process powers.
Growth in demand that will tie to American re-shoring of manufacturing should drive growth
Siemens Energy Thesis
Producer of gas turbines that are used to power data centers. Backup power.
This week I have seen 4-5 mentions of power constraints on data centre roll-out