Quote · Excess Returns
Finding Quality Growth in Emerging Markets with Ian Smith
Where this was said
AI capex, picks and shovels, and EM supply chains
At 21:45 · chapter starts 18:37
Ian Smith discusses how the AI capex buildout is reshaping EM indexes, why picks-and-shovels is still the right place in the cycle, and why the $750B capex trajectory implies an inevitable fade. [1] — Ian Smith "Six major tech companies will spend around $750 billion on AI capex this year, growing 80% year-over-year. Extrapolate that to 2030 and you…" 21:10 [2] — Ian Smith "Investors are confusing the flow of new equipment orders with the growing stock of equipment already installed. For long-duration power inf…" 24:15
The 'fundamental stability' factor — a proxy for quality — has performed worse year-to-date in 2025 than at any point in MSCI EM history.
Six major tech companies will spend around $750 billion on AI capex this year, growing 80% year-over-year. Extrapolate that to 2030 and you get $8 trillion from just those companies. That can't happen — capex will fade, and investors need to be positioned for when it does.
The big 3 hyperscalers plus Meta, Oracle, and CoreWeave are expected to spend roughly $750 billion on AI capex in 2026, growing 80% year-over-year.
If current AI capex growth rates were sustained linearly to 2030 for just 6 companies, the cumulative spend would reach $8 trillion — which Ian Smith says is clearly unsustainable.
Investors are confusing the flow of new equipment orders with the growing stock of equipment already installed. For long-duration power infrastructure lasting 20–40 years, when the buildout ends, demand for new equipment can collapse to near zero even while the installed base keeps growing.
