Market Pulse: Everyone Wants a Piece of the Future. That Might Be the Problem.

Every market cycle has a story that captures investor imagination.

Sometimes the story is about a new technology. Sometimes it is about a new business model. Sometimes it is about a visionary founder who can will an unfathomable future reality into existence. At their best, these stories are not simply hype. They are attached to genuine progress, real innovation, and companies that may ultimately reshape entire industries.

Artificial intelligence and SpaceX both fit that description.

AI may prove to be one of the most important technological developments of our lifetime. It is already changing how software is built, how companies analyze data, how people work, and how capital is being allocated across the economy. SpaceX, meanwhile, has achieved what once seemed nearly impossible: reusable rockets, dramatically lower launch costs, and a satellite network that has changed the economics of space-based communications.

These are not small achievements and they absolutely deserve attention. But attention can inflate a story faster than fundamentals can support it.

In Greek mythology, Icarus was given wings made of feathers and wax. His father warned him not to fly too close to the sun, but the thrill of flight proved too tempting. The higher he flew, the more vulnerable he became. Eventually, the wax melted, the wings failed, and the story became one of history’s enduring warnings about ambition untethered from restraint.

Investing has its own version of this story. Great companies can fly. Transformational technologies can create enormous wealth. But when excitement pushes valuations to great heights, investors become increasingly dependent on assumptions going absolutely to plan. Growth must remain exceptional. Margins must expand. Competition must remain manageable. Capital must remain available. Execution must be nearly flawless.

That does not mean these investments will fail. It means the margin for error is narrow.

This distinction matters today because the scale of investment tied to AI is staggering. Goldman Sachs estimates that the AI buildout will require approximately $7.6 trillion of capital over the next five years across compute, data centers, and power alone.¹ To put that in context, $7.6 trillion is larger than the annual GDP of every country in the world except the United States and China.

That capital is not some abstract number. It is a wave of capital going into chips, servers, cooling systems, land, electricity, transmission infrastructure, and data centers. Reuters recently reported that the top 11 cloud and infrastructure providers, including Microsoft, Alphabet, Meta, Amazon, and others will spend $811 billion in 2026 alone.²  

AI is no longer just competing for investor attention. It is competing for capital, power, labor, land, and management focus. The opportunity may be enormous, but so are the resources required to pursue it. At some point, investors should ask a basic question: what return will all of this capital earn?

That answer is still uncertain. History suggests that transformative technologies often create enormous benefits for society while producing uneven outcomes for investors. Railroads changed America, but many railroad investors lost money. The internet transformed the world, but many companies from the late 1990s never justified their valuations and took decades to recoup their IPO value if they survived at all. More recently, WeWork was once valued at $47 billion before its IPO plans unraveled, its valuation collapsed, and the company ultimately entered bankruptcy protection.  

The lesson is not that bold visions should be dismissed. The lesson is that storytelling can outrun fundamentals.

SpaceX may soon provide another fascinating test. The company is reportedly targeting a roughly $1.75 trillion valuation in a potential IPO that could raise about $75 billion and become the largest stock market flotation on record. SpaceX is clearly not WeWork. It has achieved extraordinary technical progress, built defensible capabilities, and created businesses that competitors have struggled to replicate. The point is not to equate the two companies. The point is to recognize the common investor temptation that has played out many times before. When a company captures the collective imagination, price starts to feel secondary.

At a $1.75 trillion valuation, investors are not merely buying what SpaceX has already built. They are buying a company with reported revenue below $20 billion and paying for a future in which launch, satellites, connectivity, defense, space infrastructure, and perhaps businesses not yet fully visible all compound into something far larger. That future may arrive. It may even exceed expectations! But the more ambitious the valuation, the more things have to go right.

This same logic applies to AI. The technology may be real, productivity benefits may be meaningful, and the companies funding the buildout may be among the strongest businesses ever created. And yet, none of that guarantees that every dollar invested at today’s prices will earn an attractive return.

For investors, the practical risk is not isolated to a singular company. The entire financial system, especially within the U.S. market, is more exposed to this theme than most realize. A household may own the S&P 500, a large-cap growth fund, a technology stock, a private credit fund, an infrastructure investment, and a real estate vehicle. On paper, those are different investments. Economically, many may be increasingly dependent on the same underlying assumption that the AI and innovation buildout continues to justify extraordinary levels of capital spending and valuation.

This is not an argument to avoid innovation. It is an argument to measure exposure honestly. Great investments often feel uncomfortable at the beginning and obvious in hindsight. Poor investments often feel obvious at the beginning and painful in hindsight. That is what makes manias difficult. They usually contain a truth. The problem is not that the story is fake. The problem is that the story becomes so compelling that investors stop asking what is already priced in.

At Highland, we believe portfolios should be built for a range of outcomes, not for a single exciting future. That does not mean ignoring AI, avoiding growth companies, or dismissing private market opportunities. It means being careful about concentration, valuation, liquidity, and the role each investment is expected to play.

The future may belong to artificial intelligence. SpaceX may become one of the most important companies in the world. Both may create immense value over time. But investors should remember that even great stories can become expensive lessons.

The goal is not to avoid flight. The goal is to make sure the wings are built to survive the heat.

In environments like this, thoughtful positioning matters. These are the conversations we are having with clients today. If you’d like to start one, we invite you to connect with us here: Contact Us | Wealth Management in Washington | Highland Private.

Warm regards,

Evan Wirkkala, Chief Investment Officer

¹ https://www.prismnews.com/workplace/goldman-sachs/goldman-sachs-sees-resilient-growth-ai-momentum-and-oil

² https://www.reuters.com/commentary/breakingviews/how-big-techs-630-bln-ai-splurge-will-fall-short-2026-03-26/