AI’s Spending Boom & the Growth Trap

Good morning, ! This week we're covering the AI’s CAPEX trajectory, Europe continues to win investors, and waht happens when a leader runs out of market room.

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DATA DIVE

AI's CAPEX Boom: The Real Money May Come After the Buildout

Stat: During the telecom bust, Nortel's revenue collapsed roughly 60% from its 2000 baseline by 2002, while Equinix grew nearly 6x. By 2006, Equinix's revenue had climbed to approximately 22x its 2000 level. Same infrastructure cycle. Very different outcomes.

Context: Nortel made money supplying the network. Equinix made money turning that network into something businesses actually needed. When the telecom bubble burst, the fiber stayed. Value migrated toward interconnection, reliability, and operational execution. Fast forward to today's AI data center CAPEX boom, and the parallel is hard to ignore. Billions are flowing into chips, compute capacity, and data centers, but building infrastructure and monetizing it are two very different businesses.

Strategic Takeaway: For PE investors, the opportunity may extend beyond owning the physical assets to backing the companies that make AI productive: systems integrators, vertical AI platforms, workflow automation, and managed services. The critical underwriting question is not simply how much compute gets built, but who captures the economics when capacity becomes abundant.

Bottom line: The telecom bust didn't kill the internet. It changed who made money from it. AI could follow the same playbook.

Read the Full Report HERE

EDITORIAL CONTENT BROUGHT TO YOU BY DATASITE

AI Is Moving Faster Than the Boardroom

AI is quickly moving from experimentation into operating models, capital allocation and decision-making. Board oversight, however, isn’t moving quite as fast.

Deloitte finds that 66% of executives and directors see limited AI knowledge and experience at the board level, while 31% say AI isn’t even on the board agenda. PwC puts the capability gap in even sharper relief: 71% of directors identify AI as the board skill most in need of strengthening.

For PE firms and portfolio companies, this is becoming more than a technology issue. As AI increasingly influences diligence, risk assessment and strategic decisions, boards need to determine where AI can inform a decision—and where human judgment must remain final.

The governance question is shifting from “Can we use AI here?” to “What decision rights are we willing to give it?”

Continue reading: The AI Governance Gap Is Moving Into the Boardroom. Explore why AI adoption is outpacing board readiness—and how governance is becoming a question of decision rights, accountability and human judgment.

Go deeper: Explore Datasite’s AI Governance Guide for Boards for a practical framework to challenge AI-generated analysis, maintain human accountability and build more defensible AI-informed decisions.

Join Datasite as the M&A Technology Partner of the AI Data & Insight Private Capital Breakfast in London, an invitation-only gathering at London's May Fair Hotel.

TREND TO WATCH

Europe's Competitive Edge: Scale Over Cost

Europe is winning investors over with market opportunity, but operating costs tell a different story.

According to EY, 51% of respondents identify market size as Europe's biggest competitive advantage, followed by access to finance (39%), quality of life (36%), and infrastructure (31%). Innovation and R&D also stand out at 28%, reinforcing the region's appeal for businesses seeking established markets and sophisticated ecosystems.

The interesting part? Only 19% see economic conditions as an advantage, while just 14% point to geographic location. Europe may offer scale, but investors aren't necessarily betting on favorable operating economics.

For PE sponsors, the distinction matters. Businesses that can leverage Europe's market depth, infrastructure, and innovation capabilities may offer attractive expansion opportunities. But those relying on favorable economic conditions to drive returns face a more uncertain proposition.

Bottom line: Europe's investment appeal is built on access and scale, not economic advantages. The opportunity for PE lies in identifying businesses capable of converting those structural strengths into sustainable earnings growth. (More)

It's time to set up your holiday streaming campaign

Are you ready to reach holiday shoppers on CTV? For many streamers, the season is already underway.

Last year, according to Roku internal data, holiday content searches on Roku saw an 86% increase during October. And in November, those searches rise an average of 39% weekly. This surging holiday spirit is mirrored by consumer activity, as about half of Roku streamers shopped Black Friday and Cyber Monday deals in 2025.

Meeting those shoppers is easier than you might think. Begin with the seasonal outcome you hope to drive: awareness, online sales, leads, store visits, or another measurable goal. From there, define your audience, upload your creative, set the budget and campaign dates, and establish measurement before launching. You can even create a shoppable ad unit that lets streamers buy with a click of their remote.

Our holiday playbook offers a month-by-month guide to reaching shoppers during this all-important time of year.

First-time spenders get a $5,000 match on the first $5,000 spent with code BEEHIIV5K. Terms apply.

Launch your campaign today.

DILIGENCE CORNER BY 150 DILIGENCE

The Growth Ceiling: When Market Leaders Run Out of Room

A company can dominate its market and still make a disappointing PE investment. The problem? Market leadership doesn't necessarily mean there's room left to grow.

One of the most important questions in commercial due diligence isn't how much a business has grown, but how much growth remains available to its next owner.

A company might control a substantial share of its core niche, enjoy strong customer loyalty, and generate attractive margins. But if customer penetration is already high and the underlying market is maturing, future growth becomes harder to capture.

That's where diligence gets interesting. Investors need to distinguish market saturation from genuine expansion potential, testing whether growth can come from new geographies, adjacent customer segments, or additional products. Each opportunity carries different execution risks, competitive dynamics, and capital requirements.

Why it matters: Paying a premium multiple for a market leader only works if the next chapter of growth is achievable. Otherwise, sponsors risk underwriting yesterday's success rather than tomorrow's returns.

The diligence question: Are you buying a growth platform or simply the best business in a market that's running out of room? (More)

MACROVIEW

The Global Monetary Pause: Why the Fed and ECB Are Holding Rates

The Federal Reserve and European Central Bank held interest rates unchanged in October, signaling a period of monetary caution as policymakers navigate persistent inflation, geopolitical uncertainty, and uneven economic growth.

According to IMEN surveys, 73% of respondents expected the Fed to maintain rates, up from 54% in September, while 64% anticipated an ECB pause. Despite similar decisions, the underlying economic conditions differ considerably.

The U.S. economy remains relatively resilient, with third-quarter GDP growth estimates ranging between 2.6% and 3.5% annualized. Meanwhile, Europe faces a more challenging combination of inflationary pressures, fiscal vulnerabilities, and geopolitical exposure.

Beyond immediate monetary decisions, geoeconomic fragmentation and AI-driven capital investment are reshaping inflation dynamics and long-term interest-rate expectations.

For private equity investors, the implications extend beyond borrowing costs. Discount rates, asset valuations, financing availability, and exit conditions will increasingly depend on whether monetary stability can persist amid structural economic change. (More)

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