Commodity capital expenditure booms historically occur during high-rate environments, not low ones. High rates signal an undersupply in the physical economy, indicating that capital must be deployed into 'asset-heavy' industries to meet demand, which in turn leads to a broad repricing of physical assets.

While aggregate gross investment numbers look strong due to the AI boom, this hides weakness in classic cyclical sectors like residential investment, construction, and industrial equipment. This divergence creates opportunities for trades like long tech/short energy, which capitalizes on the two-speed economy.

The dominant investment theme is shifting. For two decades, capital favored intangible assets like fintech and cloud computing. Now, investors are rotating into 'real things' with significant supply constraints, representing a complete reversal of the prevailing trend.

Commodity supercycles are characterized by violent price spikes and crashes. This extreme volatility deters the long-term capital investment required to increase supply. Fear of another collapse prevents producers from expanding, thus ensuring the cycle of scarcity and price explosions continues.

The current AI-driven CapEx cycle is analogous to historical bubbles like the 19th-century railroad buildout and the dot-com boom. These periods of intense capital investment have historically led to major economic downturns and secular bear markets, suggesting a grim multi-year outlook beyond the current cycle.

The historic rotation between asset-light (tech) and asset-heavy (commodities) industries is breaking down. AI requires massive physical infrastructure (data centers), turning 'bits' companies into 'atoms' companies and creating huge new demand for energy and materials.

This supercycle is a direct result of three global policy shifts. The 'war on free trade' forces resource stockpiling. The push for energy security drives electrification. Finally, fiscal transfers to lower-income groups (redistribution) boost demand for physical goods.

The current commodity supercycle is intensified because traditionally asset-light tech companies (hyperscalers) are now massive consumers of physical resources. They are building data centers and competing for materials like copper, fundamentally altering their business models and commodity demand.

Despite a compelling fundamental story for commodities, significant capital has not entered the sector. Investors, scarred by past downturns and drawn to high returns in tech, are hesitant to fund new production. This capital starvation is the core reason the supply crunch will likely worsen.