November 2025 Update

November, 2025

Is it 'To Infinity and Beyond' or 'Obviously an Ouroboros'

Markets had a little wobble and then it was 'situation normal' and they went back up with the A.I. theme leading the way. The global strategies rose over 3% each in the month of October. The infrastructure strategy rose marginally in A$.

As we wrote last time, the problem with momentum as a risk factor is that while it's profitable, it comes with elevated risk. Since everything moves together you lose diversification benefits in a portfolio such that in any correction there is less resilience than you believed. Momentum is not a factor to allow to dominate.

There is no need to expand on the theme du jour and that the driver of momentum is A.I. Valuations however are stretched based upon normal recent (last 40 years) experience. A lot of smart people are trying to call the top and indeed there are signs on valuation grounds and internecine linkages to overcome balance sheet deficiencies for some companies, that we are approaching the top. On valuation grounds it looks like revenues and profits will have to go to infinity and beyond. Peak complacency abounds.

Yet maybe the commitments to spend on A.I. are honoured and the capital to do so is raied? This gives us the Ouroboros analogy. The Ouroboros is a mythical snake that eats itself. If A.I. requires so much power that cannot yet be provided, what will happen to the EXISTING demand from consumers such as households and industries? If much of the incremental power currently planned for the grid is consumed by A.I. then the consumers will be starved and there can be no revenues generated to the A.I. providers. If power is not fully diverted to A.I. but remains split, then the revenues projected will be short. This will not be good for the multiples of the stocks nor the value of IPOs. Sam Altman of OpenAI said the company is committed to spending USD1.4trn to develop 30 gigawatts of computing resources, enough to power roughly 25 million US homes. Where is that power coming from in time to justify the rating? He would like OpenAI to add 1 gigawatt of compute every week, an astronomical sum as each gigawatt currently comes with a capital cost of over USD40bn.

The Ouroboros is a mythical snake that eats itself. It is possible that the A.I. boom is an Ouroboros?

Our stance? If A.I. spend continues then the grid and traditional fuels are needed very quickly or the Ouroboros reveals itself. If the A.I. spending doesn't appear the grid is outdated for accommodating renewables anyway. Invest in the companies that build, maintain and repair the transmission grids.

Stock moves in the month were extreme. Ibiden rose approximately 60%, Sumitomo Electric Industries 33%, Teradyne 32% Kurita Water 16% and Alphabet 15%. Price declines in F5 of 21%, International Paper of 17% and Evercore of 13% remind us that errors are always with us. We trimmed Ibiden.

Delft Partners November 2025