Episode summary
We Asked T. Rowe's $8 Billion Tech Manager Why We Are in 1998 — And Why Software Is in Trouble
Excess Returns
· · 1 hr 1 min · Hosts: Jack Forehand, Kai Wu · Guests: Dom Rizzo
Summary
Dom Rizzo argued that the recent tech pullback looks more like a 1998-style correction than the end of the AI boom. He pointed to high momentum, geopolitical noise, and hedge-fund positioning as similarities, but said the key difference is fundamentals: semiconductor revenue is still growing sharply, not falling as it did in 1998.
He said the AI capex cycle is still early and may be accelerating, with hyperscaler spending potentially rising from roughly $800 billion in 2026 toward $1.5 trillion to $1.6 trillion in 2027. In his view, cloud growth and margin expansion show that the return on invested capital is real, even if the largest risk is that demand eventually concentrates in OpenAI and Anthropic and shifts bargaining power around the stack.
On the software side, he was bearish on traditional application software and more constructive on infrastructure software and the frontier labs. Dom said AI is structurally capital intensive, semiconductors remain cyclical, and the main economic winners are likely to be chips, memory, and the companies that control the model layer and the underlying compute infrastructure.
Key takeaways
- Dom Rizzo thinks the selloff resembles 1998 more than a terminal AI top because semiconductor revenue is still rising, not contracting.
- He expects hyperscaler capex to keep accelerating, potentially from roughly $800 billion in 2026 to $1.5 trillion-$1.6 trillion in 2027.
- Dom said the biggest near-term question is whether OpenAI and Anthropic capture most of the economic value while open-weight models commoditize parts of the stack.
- He sees traditional application software under pressure as agents and frontier models take over more of the user interface and workflow.
- Dom said semiconductors will remain cyclical, but the current cycle is being driven by structurally capital-intensive AI demand rather than classic PC or smartphone demand.
Notable quotes
“This feels a lot like the 1998 sell-off to me”
“If you look at the hyperscalers in capex spend, they're they're going to grow say 75% in 2026 to roughly $800 billion of spend”
“I think the most attractive place is uh the logic semis so particularly the CPUs”
“traditional application software is in trouble”
How the episode opens
Welcome to Access Returns. I'm Jack Forehand, joined by the better half of our hosting uh team today, Kai Woo of Sparkline Capital. Um, and today we're really lucky to have Dom Rizzle on.
Dom's the portfolio manager of Troric's global technology equity strategy and the firm's technology ETF. And we are going to talk about the thing everybody's talking about these days, which is AI and everything that's going on there. And uh, we're going to get deep into the technology and what it might mean for the economy and a lot of different things.
But we're going to start at a high level because we have had it's funny when I put these questions together, it was like three days ago and I was going to talk about the big correction we're having these types of stocks and then two days later we're back to a rally. But but I did want to ask you about that because uh one of the things I read in our prep for this is you had a quote that said, "This feels a lot like the 1998 sell-off to me. Which proved to be an incredible buying opportunity.
So I'm wondering if maybe you could talk about what we've seen recently in that quote.
Yeah. Well, first off, thanks for having me, guys. It's great to be to be here and uh for the listeners I think it's a really important you know that I I I I love the question list that you guys sent over.
Uh so I'm really excited for this really really excited for this pod. Um look well first off let's take this with a grain of salt. I I was 5 years old in 1998.
So this is not personal stock picking experience but uh from someone who loves markets and cycles um and studying bubbles and reflexivity uh look kind of kind of if you did rewind to 9798 I think there's a couple similarities.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- ai capex cycle
- 1998 tech selloff comparison
- open vs closed ai models
- semiconductor demand and cyclicality
- data center financing
Companies and tickers mentioned
- TSM
- ASML
- OpenAI
- Anthropic
- TSMC
- ASML
- T. Rowe Price
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Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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