Macro Minute: Week of October 20, 2025

Let’s address the biggest market narrative of the moment. Will unproductive Capex spending in AI infrastructure lead to the next big market bubble and bust? My answer to that is “maybe?”. Having been a late teen, early 20-year-old, but heavily invested in markets, in the aftermath of the dot com bubble, I have a recollection of that crash. Back then you had no revenue companies coming to market with nothing but a website and gathering large investor flows through IPO markets. Now you have AI companies in the private equity space garnering private investor interests without a full-fledged business model to profitability. That is one difference right there. The investors in this boom are on the private wealth side instead of the public markets. Theoretically, private investors in that space are more capable of handling a loss of the riskier nature. 

Now let’s talk about a similarity. These companies are investing in the infrastructure of new technology. Back then it was telecom companies that overbuilt the fiber optic backbone of the internet, some of which is still in use today, 20+ years later. Those companies did debt raises for CapEx investment betting on future revenue growth numbers that never came to fruition. This time around, the funding sources have been different. Some has come from cash flows of the largest companies in the world, some has come from private credit vehicles, and more recently, they have been tapping special funding vehicles harkening memories of the pooled mortgages that caused the housing collapse in 2008. As you can see, this brings back some very scary memories for market participants.  

I am here to tell you that I do not know how this ends. I do know that this is the biggest market story right now and will likely continue to be for the foreseeable future. As investors, we should continue to invest knowing what we own. We should also be aware that if a bubble bursts in AI, it will drag down the larger market. Staying diversified and risk aware while staying invested is the way in which I am playing this development. 

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