The Price-to-Dream Ratio

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Autonomous shopping agents, co-working and research agents, and coding agents that write, test, and deploy software. The demos are impressive and the announcements relentless, but how much economic value is any of this generating? Almost all AI-related spending is capital expenditure. Companies are buying chips, building data centers, and scaling up cloud capacity. This is spending on AI infrastructure, not productivity from AI deployment. AI is in the infrastructure buildout phase, not the value capture phase. Mass spending is generating minimal returns, but the market has decided to price the dream rather than the earnings. Can any of this translate into economic reality before the capital runs out and political patience expires? Infrastructure, capability, and revenue growth are happening. Productivity is developing. But a significant gap still exists between capital investment and return on that investment. AI is risky, but these investments are not irrational. They are pricing the dream, and the long-term winners remain unclear.

The New Software Stack

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For the better part of three decades, enterprise software followed a remarkably stable economic logic. You built a product. You sold access to that product. You charged per seat. You expanded revenue by increasing the number of people required to operate the system.
It was elegant, scalable, and wildly profitable. Now, it is breaking. It is the decoupling of software revenue from human labor. The industry continues to frame this moment as a competition between AI and software. That framing is wrong. AI is not competing with software. It is becoming the operating system for work.

Reimagining Software

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Software Is the central nervous system of the global economy and its demise is greatly exaggerated. There’s a growing narrative thatsoftware is becoming commoditized. Large language models write code. Autonomous agents assemble applications. The barriers to building digital products appear to be collapsing. If software can be generated instantly, then software itself must be losing value.
This conclusion fundamentally misunderstands how technological disruptions develop and expand. Software is becoming the infrastructure layer of modern civilization. The economic, industrial, and geopolitical systems being constructed over the next three decades will not run on software. They will run as software.

The Wheel, the Cart, and AI Systems

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The wheel was a great invention. But not until it was combined with other wheels to create a usable cart was it an innovation. The wheel was a breakthrough; a moving, stable cart was a system. Systems create intelligent, scalable, and disruptive technology. Innovations are not new technologies. Breakthroughs are necessary, but it’s systems that are the solution. The value created by AI in the physical world is not scaling software. It is focus, discipline, and constraint within effective systems. The systems that endure will not be those that promise universality, but those that dominate specific economic niches, involve humans strategically, and survive year ten of operation.

Physical Intelligence

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Robotics and related technology are ready for deployment, but the industry hasn’t crossed the threshold into full-scale production. Computational breakthroughs in stunning demonstrations are attention-grabbing, but the realities of industry quickly take over. There is a gap between robotics and artificial intelligence (“physical intelligence”) as it transitions from potential to hardware delivery in a demanding industrial setting. Physical AI and its integration into robotics may become one of the largest markets in history. But it is an industrial problem whose solution is not on a software timeline. In other words, its commercial deployment requires much more systems integration and real-world constraints than a software slide deck contemplates.

The Failure of Simplicity

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Markets destroy the comfortable assumption that tomorrow behaves like yesterday. They reward those who can identify when the system’s structure changes and punish those who try to fit new realities into old frameworks.

That is why the conventional idea of “what something is worth” has become less relevant than how systems evolve. Investors who cling to formulas intended for stable conditions will always be surprised by nonlinear disruption.

Nowhere is this more obvious than in AI and energy, where the variables are not just changing; the equations themselves are being rewritten.

Bubbles, AI, and the Economics of Belief

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The selloff in technology stocks this week startled some investors. It shouldn’t have. The signals of an AI bubble have been flashing for some time: billion-dollar raises for companies with no product, multibillion-dollar valuations for companies with no revenue, and nine-figure offers made to individual researchers. The AI race is building products that are economic complements to one another—you need the turbines that power the grids, that power the chips, that run the models, that power the products. And you need firms to build their growth and hiring plans around the expectation that ever more of their work will be done by AI. AI is in a bubble, companies will fail, and capex is unsustainably high. The real question is whether the infrastructure being built now will unlock a technological era that outlasts the speculation that paid for it.
History suggests yes. The pattern repeats because the pattern works. The bubble is not the danger. Missing the moment is.

Taiwan, Semiconductors, and U.S. Strategy

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The sustainability of advanced technologies, unique manufacturing capabilities, global access, and robust supply chains is currently dependent on ill-defined, reckless, and volatile political and economic strategies. Ignoring the reality of the situation and hoping things will eventually work out isn’t a good plan. For decades, the world has relied on Taiwan Semiconductor (TSMC) to produce the most advanced chips, powering everything from smartphones to artificial intelligence. This dependence has created an unprecedented vulnerability: a single geopolitical flashpoint controls the lifeblood of the global digital economy. The challenges of advanced semiconductor technologies and manufacturing are among the most pressing and significant issues of this generation. The U.S. must acknowledge that a world dominated by a single supplier is unsustainable. It must invest not only in fabs but also in intellectual capital, allied coordination, and long-term technological leaps. There is no guarantee of success. The rivalry with China will intensify, and Taiwan will remain a flashpoint. But inaction is the greater risk. Hope may provide comfort, but only strategy, investment, and execution will ensure resilience. Hope is not a plan.

Navigating Uncertainty

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A turbulent geopolitical and economic environment is here to stay. Allocating capital in today’s economic and geopolitical landscape requires a sharp focus on macro trends, a disciplined approach to risk, and an ability to anticipate shifts in policy and global power dynamics. The investment landscape has never been more complex, with heightened tensions between the U.S. and China, uncertainty surrounding Taiwan, and Europe’s economic fragility. The new reality is that trade realignments, subsidized industrial policies, and emerging trading blocs characterized by protectionism and localization are rising. Now What?Geopolitical risk is no longer an afterthought. The US-China rivalry, Taiwan’s strategic importance, Europe’s economic fragility, and shifting trade policies will shape the next decade of global markets. Savvy investors will anticipate these changes and allocate capital to industries and regions positioned for sustained growth. The key to success is flexibility, resilience, and the ability to recognize macro trends before they materialize fully. The future is uncertain but full of opportunities.

The US, China, and 3-D Chess

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The United States and China play global economic and political chess games. There are many moves and defensive and offensive strategies, not only for trade but also for energy and natural resources (rare earths among the most recent flavors of discord), geopolitics (Russia, Ukraine, Iran, the Middle East generally), technology (Taiwan and AI), and global economic supremacy. It’s a long list, but China and the US drive the outcomes. Instead of working for mutual benefit, regardless of fundamental cultural and political differences, we are now drawing bright lines demarking battle zones (Ukraine and Russia; Taiwan; AI and advanced technologies). The result will be economic and technical inefficiency and degradation in the quality of life, safety, and prosperity. China must acknowledge the outrage caused by its overreaching bids for control, and America must adjust to China’s presence without selling honor for profit. Competition is not us-or-them; reality is us-and-them. The U.S. semiconductor industry gets 30% of its revenue from China. China’s resulting products service the world, and China’s producers need the U.S. as well. If allowed, such examples of mutual benefit will proliferate.
It is naïve to imagine wrestling China back to the past. The project, now, is to contest its moral vision of the future. Connected, collaborative engagement is the only practical way. China has come a long way, and its trajectory cannot be ignored or dismissed. The U.S. and China will be much better off from this more enlightened, realistic perspective. See the whole board.