Full Signal This is how the AI bubble pops | Kai Wu, Sparkline Capital
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Dec 22, 2025 Kai Wu, founder and CIO of Sparkline Capital, dives deep into the shifting landscape of tech investing. He discusses how the Magnificent Seven are transitioning from asset-light to asset-heavy models, highlighting risks tied to AI's capital expenditure boom. Wu debates the impact of rising competition on tech oligopolies, emphasizing consumer benefits against producer pitfalls. He also draws parallels with historical infrastructure booms and shares insights on measuring true AI commitments, while remaining optimistic about AI's transformative potential.
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Big Tech Becoming Capital Intensive
- The Magnificent Seven are shifting from asset-light, high-margin businesses to capital-intensive AI operators.
- This transition risks lower returns because GPUs and data centers require heavy, recurring CapEx.
CapEx Correlates With Weaker Returns
- Capital-intensive companies historically underperform asset-light peers across and within sectors.
- Asset heaviness often signals commoditization and weaker economic moats over time.
AI Compresses Market Boundaries
- AI turns previously separate oligopolies into a single fierce contest where "if you win AI, you win everything."
- That dynamic raises competitive intensity and reduces monopoly-style profit power.