Edward Conard

Top Ten New York Times Bestselling Author

  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “Unintended Consequences should be read by anyone who takes for granted the superiority of progressive taxation and has not thought carefully about the trade-offs involved.” - The New Republic
Upside of Inequality Oxford Unintended Consequences

AI Summary. Stock price reactions to large artificial intelligence capital spending announcements have shifted from rewarding to penalizing companies, with the valuation multiple markets assign to such spending collapsing and likely turning negative. Technology companies once valued for low debt and low capital intensity are now among the leaders in both.

Paul Kedrosky Notes on Complexity
Date Posted:
Is Database:
Database

The Mag7 had a (marginal) capex multiplier of ~$60 in 2024 and $15 in 2025. By January 2026, this multiplier had likely turned negative, as the four largest capex announcements “collectively destroyed $475B of market cap on $320B of incremental guidance.”

Are markets now penalizing companies for large AI capital spending?

Core argument: The author's analysis shows the market multiple awarded to AI-related capex has collapsed and likely turned negative, reversing an earlier period when companies were rewarded for promising vast capex increases.

Initially companies were rewarded by markets for promising vast [AI related] capex increases. The future isn't cheap! But that reaction to spending is now reversing, as stock price reactions to outsized spending announcements have increasingly shown. This may be belated, but it was inevitable. Tech companies, once valued for their low debt and low capital intensity, are now among the leaders in both, a dubious distinction. And don't get me started about maintenance capital implied by current spending. Markets have come to similar views, reversing the multiple it gives public companies for AI capex. Check the following graph, from my analysis, to see how the AI capex multiple has collapsed, and likely gone negative. Again, this shouldn't be surprising. As Ben Graham famously said, “In the short run, the market is a voting machine but in the long run, it is a weighing machine”. Markets have, however briefly, begun weighing AI-related capex, and found its current size ... portly.

Takeaways by Macro Roundup® AI

  1. The author's analysis shows the market multiple awarded to AI-related capex has collapsed and likely turned negative, reversing an earlier period when companies were rewarded for promising vast capex increases.
  2. Stock price reactions to outsized AI spending announcements have increasingly reversed, a shift the author calls belated but inevitable.
  3. Tech companies, once valued for low debt and low capital intensity, now rank among the leaders in both, a distinction the author calls dubious given the maintenance capital implied by current spending.

Related Articles:

  • The Macro Implications of the AI Capex Boom — Artificial intelligence capital spending is estimated to add roughly 1.4 percentage points to US growth in one year and about 1.5 points the next, comparable to business investment's contribution during the tech bubble. A material part of that estimate reflects profits at Nvidia and a few other chipmakers that are unlikely to be recycled back into the economy.
  • Four Takeaways from Microsoft’s Satya Nadella at WEF Today — Microsoft's chief executive says the price of AI model usage ("tokens") falls by roughly half every three months. Commentary argues that such rapid deflation pulls demand forward, encourages overbuilding, and commoditizes models, shifting competitive advantage to orchestration and context rather than the model layer.
  • The Geopolitics of AI: Decoding the New Global Operating System — The performance gap between the top American and Chinese AI models narrowed from 9.3% to 1.7%, with Chinese firms relying on cheaper open-source models—DeepSeek prices usage 20-40x below OpenAI's ChatGPT. This price advantage could win adoption in developing countries and build dependency on Chinese AI ecosystems.
Showing 96 database articles primarily about Investment