Christopher Wood has a track record of spotting speculative bubbles. He called the dotcom boom, Japan’s credit bubble and the U.S. housing bubble before many of his contemporaries. So when he warned of an “AI capex arms race” at the Fortune Innovation Forum in Kuala Lumpur, Malaysia on Tuesday, the audience paid attention.
“But it’s completely unclear to me who’s going to monetize and make money out of all this capex,” Wood continued.
This sets up what he views as an almost-inevitable over-investment bust—though when markets finally lose patience with ballooning spending without results is unknown.
Wood’s already repositioned his own portfolio. He recently sold his Nvidia holdings, not necessarily because he believed shares have picked, but because their five-fold gains already priced in extraordinary expectations.
His AI exposure is now concentrated in China, where he believes companies are approaching the technology more pragmatically. “You need two things to do AI: compute and energy,” he said. “The Chinese are far more ahead in energy than the U.S. is ahead in compute.”
While the U.S. still leads in terms of the power of its advanced chips, Washington’s semiconductor export controls, in place since late 2022, may have inadvertently strengthened China’s position. By cutting Chinese firms off from U.S. chips, the policy both deprived American tech companies of their biggest customers and jolted Beijing into accelerating its domestic semiconductor ecosystem.
U.S. tech giants, by contrast, are pouring money into parallel efforts to build proprietary frontier models, a shift that is fundamentally altering their economics. For years, Big Tech companies rested on “asset-light” business models, each in their own space. Now, Wood said, the hyperscalers are competing in the same AI space while moving to “asset-heavy” models.
Why are U.S. tech giants spending so much? Opportunity is one answer. Fear is the other. “They’re terrified of being disrupted,” Wood said. “There’s massive FOMO. That’s what’s driving this arms race.”
