Return on reinvestment

Earnings growth is return on capital times the share reinvested. Spending is only growth if the return is there.

• Capital allocation
• Artificial intelligence

2 ideas that carry it

• FrameworkCapital allocationLetter located

  Earnings growth is return on capital times reinvestment, which is the AI spending question

  Spending is only growth if the return on it exceeds the cost; estimate the return under several assumptions before admiring the spend.

  Any capital-intensive growth story, the AI capital expenditure debate, and valuation of a company reinvesting most of its cash flow.

  From Hayden Capital's Q2 2026 letter, on the "SaaS-pocalypse" and returns on reinvestment · Fred Liu

• Company insightArtificial intelligenceLetter located

  Inference has overtaken training, and the flywheel runs on tokens

  A compute vendor's case is a flywheel from agents to tokens to compute; the buyer's case is the return on that compute, and both have to be read together.

  Semiconductor and data-centre coverage, technology investing, and any debate about AI capital spending.

  From NVIDIA's fiscal 2026 letter from Jensen Huang · Jensen Huang