Billionaire venture capitalist Chamath Palihapitiya says a historic shift in how capital flows through the technology sector is underway, as he names two specific areas where he believes the smart money should be positioned for the next several years.
In a new post on X, Palihapitiya says he’s seeing a massive capital rotation in the market as the hyperscalers continue to spend hundreds of billions of dollars in the AI buildout.
“Money is starting to flow downhill — a critical observation for the next few years. The Mag 7 may make all the money, but they are spending it faster than they can make it. Their free cash flows are cratering.”
According to the billionaire, investors once flocked into asset-light companies like software and tech, with the Magnificent 7 becoming the dominant story in the market over the past few years after capturing extraordinary levels of profits. But Palihapitiya notes that the winds are shifting for the first time in decades, and asset-heavy companies are poised to benefit from the colossal AI spending.
“Best to follow the money and see who’s getting it. In this case, it’s following the AI trade and, more specifically, the data center and power economies.
Make money from capital-light business models like ads and software, then redirect it to asset-heavy, traditional infrastructure companies.
A complete reversal from the last 20 years is underway.”
The billionaire is not alone in suggesting that investors should now focus more on infrastructure plays. “Big Short” investor Steve Eisman also said he’s looking at companies that are power-related, like GE Vernova and Quanta. Meanwhile, Goldman Sachs said names tied to power infrastructure investment have unique earnings advantages.
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