Q&A with Portfolio Manager, Claudia Kwan
In disruptive regimes, valuation matters less — sometimes not at all — because earnings forecasts are low-conviction. Analysts are excellent at extrapolating trends but poor at pricing disruption; that’s more like a venture-capital skill set. What matters instead is simple: every result has to show better growth than the last. On the way up, valuation isn’t the thing moving the share price, so it isn’t the thing to anchor to.
The mechanics of the AI capex are also worth understanding because it’s an interesting accounting-led equation. When growth turns explosive, a single dollar gets recorded two completely different ways. The company receiving it books the full amount as revenue, today. The company spending it capitalises the outlay and spreads it over roughly five years. Zoom out to the whole economy and you recognise 100% of the revenue against only about a fifth of the matching cost. The growth is real on paper, but you’ve borrowed it from the future. The pattern that follows is predictable: strong GDP while the build-out runs, then notably muted growth once it rolls off. It’s operating leverage, scaled up to an entire economy.