Anything that can be converted into capital and poured into AI hyperscale infrastructure is being pulled off the walls and melted out of businesses.
Capital and debt trapped in places that are not AI are losing value. And, as the post financial crisis debt cycle shudders to a grim conclusion, there is a lot of offloading risk to retail investors.
This digital blast wave emerging from Silicon Valley and expanding across the landscape, unlocking value, today feels like a black hole eating up the economy closest to where the blast wave first emerged.
Then there is the White House…(imagine me pausing here and looking at you with a meaningful expression before moving on). But we will return to that with a separate piece, so we’ll bookmark it for now.
Meanwhile, debt is rewriting the rules
For more than a decade, private equity thrived on the assumption that recurring‑revenue software was the closest thing to an annuity.
Debt was plentiful, models were stable, and the math worked.
AI‑native tools now threaten to replace, or at least take over, the next evolution of entire software categories at marginal cost – once the infrastructure is built.
Some previously defensible products now face erosion in pricing power, switching costs, or utilization patterns. As this sets in, credit analysts are projecting a meaningful rise in defaults concentrated among highly leveraged software and data services companies, especially those acquired during the low‑rate era.
The barbell strategy
Some operators are holding on while the tide goes out. Strong, cash‑rich incumbents can borrow to scale AI and secure scarce infrastructure, while highly leveraged mid‑tier players face tightening financial constraints. Early AI adopters without audited productivity gains risk burning capital, and leverage magnifies both the upside and the consequences.
The smartest operators and allocators are avoiding the fragile middle. They are running a barbell.
On one end: high‑conviction, capacity‑locking investments. On the other: money making, even low tech, done-by-hand businesses. Or at least products and execution that stay super close to deep enterprise problems and efficiently produce value. Preferably, capital is sourced without leverage, and from places that can be patient.
I know, don’t we all want sources of capital like that? Yes, in theory. But in practice those sources have been ridiculed as amateur or exotic, and cash efficiency in the low tech has seemed out of touch.
Somehow, we’ve valorized professional “smart money” in high-debt efforts thrown at high-growth, but speculative, bets. And sure enough, that movement worked long enough that the smart money is starting to look not so smart.
So how do businesses built like that advertise themselves to investors, customers and acquisition targets who aren’t used to seeing their strengths?
Well, I’m glad you asked.
Narrative clarity to cross the chasm
If you’re unlevered, you’re the exception, and the market gets nervous about exceptions. The ability to articulate why you exist, what you solve, and why now is an economic asset.
Moments that matter—launches, leadership updates, category pivots—must be sequenced, staged, and supported with true narrative infrastructure. This means aligning internal operations, market positioning, and communication well before going public with a story.
Precision, independence, and staying power
Today’s environment rewards organizations that operate with:
- Operational Precision:Build systems that scale intentionally, not accidentally. Slowness is not a bad thing in this case. Eliminate waste. Instrument everything.
- Capital Independence:Reduce external dependencies where possible. Borrow only for assets with provable, compounding utility.
- Strategic Specialization: Become indispensable in a specific domain, if not a few that are interrelated.
- Narrative Pathfinding: There are entrenched capital interests trying to get out of a burning building while pretending it’s in fine shape. Trying to look like them is not going to work out well. Find the stories that match the news cycle and help people see you more clearly. (This requires more detail, so stay tuned for how this playbook works in 2026 in a future post.)
- Persistence Over Hype:The winners of this cycle will not be those who sprint first, but those who remain standing long after the noise subsides.
The AI supercycle is not a gold rush; it is an infrastructure epoch, spanning power, data, risk, and governance. It rewards those who balance ambition with discipline, who build for endurance rather than applause, and who understand that today’s constraints are tomorrow’s moats.
This is not the era of “growth at any cost.”
This is the era of build, endure, and compound. The growth wave is coming, but you have to survive this part first.
