Entering the Intelligence Age

When thinking about artificial intelligence (AI), it’s helpful to take a step back, zoom out and review past innovation cycles. As seen in the first chart below, historical innovation cycles, from the mainframe to the PC, the desktop and mobile internet, the cloud and now AI, happened in sequential waves that spanned roughly a decade, each built on the one before.

Each distinct era had winners such as IBM with mainframe computers, Dell and HP with the PC, Facebook and Google with desktop internet, Apple with mobile internet, and Amazon and Microsoft with the cloud, where they’ve captured about 50% of the market. Each wave is like a bell curve that rises, peaks and gives way to the next wave, where the value shifts to a new set of firms.

As we move further along with the AI buildout, we must consider whether AI is another wave in the “Information Age” or the start of a new age, which could intuitively be called the “Intelligence Age.”

The second chart below shows that each age has been shorter than the one before it, possibly due to humans getting smarter in aggregate, the world naturally moving faster and each generation building on the prior generation’s work in a compounding fashion.

It also shows that something replaced something else: farms replaced foraging in the Agrarian Age, machines replaced muscle in the Industrial Age and software replaced paperwork in the Information Age. Will tokens replace work in the Intelligence Age? How long could this new age last?

While those questions are debated, let’s review the scale of the AI data center buildout by looking at capital expenditures (capex) as a percent of U.S. GDP.

The final chart below clearly illustrates both the speed and scale of investment in IT hardware and equipment, real estate, power infrastructure, physical facilities and everything else needed to get a data center operational. Put simply, this is one of the largest and fastest capital investment cycles in U.S. history relative to the size of the economy.

The interesting part of this Intelligence Age is that it’s the exact opposite of the Cloud/SaaS wave in the Information Age, when the world was asset-light and software could scale with little physical capital. Now we shift gears into a world that is becoming more asset-heavy, where greater amounts of physical capital are needed.

For investors, the key questions include who the winners and losers could be, how business models could be upended or modified, who and what could be replaced during this next wave, how long the AI infrastructure buildout could last and what second-order effects may only become clear in hindsight.

The Gradient Investments team will continue to evaluate the quickly changing nature of the AI buildout and the implications for each of our unique portfolios as AI proliferates throughout the economy over time.

^{1 https://www.coatue.com/c/takes#chart-of-the-day-2026-10-14}

 

The information provided herein represents the opinions of the author and Gradient Investments as of the date of publication and is subject to change without notice. This commentary is for informational and educational purposes only and does not constitute personalized investment advice or a recommendation to buy, sell, or hold any specific security, including the companies named above. Forward-looking statements, including statements about industry trends, pricing, and demand, involve risks and uncertainties, and actual results may differ materially. Investing involves risk, including the possible loss of principal. Data cited from third-party sources is believed to be reliable but has not been independently verified by Gradient Investments.