At Prospera, we believe successful investing begins with understanding the broader forces shaping the economy, markets, and innovation. Few frameworks help illuminate these forces more clearly than Carlota Perez’s seminal book, “Technological Revolutions and Financial Capital: The Dynamics of Bubbles and Golden Ages”.

Perez offers a powerful lens for interpreting past cycles of disruptive innovation—steam, electricity, automobiles, computing—and applies it to the ongoing technological revolutions reshaping our world. Her framework helps us identify where we are in the current cycle, what to expect next, and how both venture and public capital should position for long-term value creation.

As AI, semiconductors, and green infrastructure dominate headlines and market flows, her insights are not just academic—they’re urgent and practical.

The Perez Framework in Brief: A Cycle of Innovation, Speculation, and Renewal

Perez shows that every major technological revolution follows a recurring pattern with four core phases, shaped by the dynamic between technological innovation and financial capital.

1. Irruption (Invention)

A radical new technology emerges. It’s immature, risky, and underappreciated. Venture capital begins flowing in. Entrepreneurs explore uncharted territory.

2. Frenzy (Speculation)

As the new technology gains attention, financial capital floods in. Bubbles form. Valuations detach from reality. The media fuels hype, and inequality rises.

3. Turning Point (Crisis)

The bubble bursts. Only the strongest survive. The state intervenes. Institutions adapt. Productive capital is reoriented toward sustainable, long-term growth.

4. Synergy (Golden Age)

The technology is fully integrated across the economy. Real productivity gains emerge. Profits are shared more broadly. Long-term compounding begins.

Eventually, the cycle matures—and a new irruption begins.

Applying Perez to Today’s Landscape

We believe we are now late in the Frenzy phase of the fifth technological revolution: the Information and Communications Technology (ICT) revolution, now dominated by AI.

While this revolution began with microprocessors and the internet in the 1970s, it is entering a new inflection point driven by large language models, edge computing, AI infrastructure, and autonomous decision-making systems.

But with this explosive growth comes risk. History suggests a correction is possible, a Turning Point, where speculative excess is burned off, and the true winners begin to shine.

VC in the Perez Cycle: Insight vs. Hype

Irruption Phase VC:

• Fund true innovation: AI model architectures, energy storage breakthroughs, synthetic biology.

• Accept uncertainty; returns come from information asymmetry and conviction.

• This is where venture capital plays its highest-impact role.

Today’s examples:

DeepMind, OpenAI (pre-Microsoft), Helion Energy, early Anthropic, Graphcore.

Frenzy Phase VC:

• Momentum dominates.

• Capital floods in, but diligence weakens.

• Risk of misallocating capital to “me too” startups with no defensible moat.

Recent examples:

Dozens of late-stage LLM startups raising at $1B+ with little revenue, AI agents built on OpenAI with no differentiation, overfunded battery startups.

Turning Point VC:

• The strongest startups consolidate.

• Survivors emerge with real business models.

• New vintages outperform as they fund durable, capital-efficient winners.

Strategy:

Double down on portfolio resilience, cut hype exposure, and refocus on core innovation with real traction.

Public Equities in the Perez Cycle

We also apply this framework to listed companies across sectors—especially those riding the AI and electrification wave. Here’s how we see the public market landscape today:

Frenzy Phase Stocks (Speculative)

• Nvidia (NVDA): Explosive earnings, but priced for perfection—near $2.5 trillion valuation.

• Supermicro (SMCI): Massive parabolic run; signs of a bubble.

• Palantir (PLTR): Rebranded as an AI leader; questions remain about stickiness and profit model.

• Arm Holdings (ARM): Valuation leaping on AI exposure, though monetization is long-term.

Turning Point Stocks (Repricing & Realignment)

• Amazon (AMZN), Alphabet (GOOGL): Cutting costs, monetizing cloud and AI infrastructure.

• Intel (INTC): Trying to catch up, but benefiting from policy tailwinds (CHIPS Act).

Synergy Phase Stocks (Infrastructure & Compounding Engines)

• Microsoft (MSFT): Leading AI integration into enterprise workflows; Azure is monetizing models at scale.

• ASML & TSMC: Semiconductor infrastructure giants; core to long-term AI deployment.

• Brookfield Renewable, Schneider Electric: Electrification and decarbonization plays with steady long-term growth.

Strategic Implications for Investors

At Prospera, we help clients align portfolios to long-term secular cycles, not short-term narratives. Here’s how we interpret the current environment:

Phase VC Strategy - Public Equity Strategy

Irruption: Fund true innovators, frontier tech - Optionality plays (small cap, pre-revenue names)

Frenzy:  Avoid chasing hype, focus on core infra - Trade momentum with caution; trim oversized gains

Turning: Point Back survivors, focus on real economics -Rotate into cash-flow leaders post-correction

Synergy: Play scaled applications, compounders - Long-duration holdings in foundational platforms

We believe the next decade offers potential for a Golden Age, but only if capital is aligned productively, speculative excess is tempered, and institutional adaptation keeps pace with innovation.

Planning Your Tranquility in an Age of Disruption

Perez teaches us that technological revolutions are never smooth rides. They are messy, volatile, and prone to misallocation—but they also offer unprecedented opportunities for those who understand the cycle.

At Prospera, we help clients move beyond the noise of the Frenzy and position portfolios for the Synergy. Whether you’re allocating to venture, public equities, or hybrid strategies, our goal remains the same:

Turn disruptive change into enduring peace of mind. That’s what it means to Plan Your Tranquility.