The AI trade isn't a bubble - it's a supply problem

The current surge in AI investment, while reminiscent of the dot-com bubble, presents a fundamentally different landscape. Unlike the 1990s, where infrastructure outpaced demand, today's AI boom is driven by existing, massive user bases and rapidly evolving capabilities.

This strong demand is compelling hyperscalers to invest heavily in data centers and chips, with capital expenditures soaring. Despite impressive earnings growth for AI-focused companies, many trade at historically low valuations, indicating a focus on profitability rather than speculation.

While risks like overcapacity and market consolidation exist, the underlying dynamic of existing demand meeting a scrambling supply, supported by profitable companies, suggests a more sustainable investment thesis for AI-exposed assets over the next three to five years.