The Capital Cycle Is Turning

When Intel invented DRAM memory chips in 1970, it was the pioneer. Fifteen years later, it exited the business entirely. The reason: constant overinvestment, endless competition, and a product that became a commodity where no one could earn a decent return. By 2014, the number of DRAM manufacturers had collapsed from thirty to just three surviving companies — Samsung, SK Hynix, and Micron. That consolidation, as Luke Bridgman of Hosking Partners explains, is the story of the capital cycle in action. And it is the lens through which his firm views every investment decision across global equities.

What Capital Cycle Investing Actually Means

The capital cycle rests on a simple observation: high returns attract capital, and that capital competes away those returns until profits fall to the point of bankruptcy, obsolescence, or merger. Then, with competition removed, returns recover and the cycle begins again. Bridgman describes it as "not rocket science" — it is a basic pattern in business and economics.