Weekend Thinking Dec 5, 2025

Three things worth thinking about this weekend:

1. Aging populations vs AI
2. Tech industry's capex regime change
3. The two Michaels—investor Burry and writer Lewis—reminisce

1. On the battle between aging populations and AI-driven productivity gains (JPM)

1. Working-age population growth should be reduced by 0.5%-points pa in the US, 0.8%-points pa in the Euro Area, 0.1%-points pa in Japan, 0.2%-points in the UK, 1.3%-points in China, and 1.8%-points in South Korea.
2. The median assumption from studies is that Al will raise labor productivity growth by 0.5-1.0%-points pa in the coming decade, depending on the exposure of a country to Al.
3. On average, the effects of Al on labor productivity look to be similar in size to the growth effects of slower working-age population growth vs. 2000-2024.
4. This will make AI effects on growth a wash, at best.

2 Tech's industry capital expenditure regime change over the last decade (Bloomberg)

1. Tech used to be a low capital expenditure business with cheap scaling, but that began changing five years ago.
2. Its capex spending has intensified in recent years,  with it, for example, now 25% of Microsoft's revenue, a tripling from 10 years ago.
3. Microsoft's capex to sales ratio now dwarfs Exxon's.
4. Despite the regime change, funded in part by debt, tech companies are pricier than ever: Microsoft shares trade at more than 28 times projected forward earnings, higher than its 10-year average.
5. Because of the spending, Meta and Microsoft are expected to have negative free cash flow after accounting for shareholder returns next year.
6. A more capital-intensive tech industry will likely drive a more boom-bust cycle.

3. The Two Michaels Talk AI and the Big Short (Apple Podcasts)

1. Writer Michael Lewis and investor Michael Burry talk for the first time in more than a decade, after The Big Short movie and book
2. The latter was forced to be more public, he says, after a "small" put position against Palantir and Nvidia leaked.
3. His thesis is/was:
   1. Palantir is a consulting-heavy government contractor that slapped an “AI” label on old software.
   2. Nvidia is a graphics-chip company that lucked into two consecutive manias (crypto, AI).  
   3. Palantir has a “billionaire-to-revenue ratios > 1,” a red flag Burry has never seen before.  
   4. AI capex is like the 2000 fiber build-out, and market peaked when spending was only half-done, so bought 2-year options.
4. 50 % of U.S. equity money is now passive, so there are no neglected stocks: everything moves together.
5. Not one investor ever apologized for threatening to sue him during the "big short" trade.
6. He has never re-watched the Big Short movie or re-read Lewis's book.

Have a good weekend.