“Fund intelligence that compounds capital. Cut intelligence that consumes it.”
The AI Supercycle remains intact. The free-capital era does not. At a ~5.2% risk-free rate, scale without returns destroys value.
The next re-rating will separate AI cash generators from AI capital consumers.
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What the re-rating rewards
how capital re-sorts under a 5.2% rate
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The AI names that convert intelligence into compounding capital will command the re-rating. Returns above the risk-free rate justify the scale behind them. signal: Compounding beats scale when capital is no longer free.
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Intelligence that consumes capital without returning it no longer survives a 5.2% hurdle. The subsidy of free money is gone. signal: Growth that does not pay for itself gets re-priced down.
The rule for investors and boards
simple, and non-negotiable
- Fund intelligence that compounds capital.
- Cut intelligence that consumes it.
- Judge every AI dollar against a ~5.2% risk-free hurdle.
Francesco De Leo Kaufmann · The Velocity Edge