SuperCycles – periods where prices of particular products are significantly increased (or decreased) for extended periods – occur when massive new demand comes online.
SuperCycles can last more than 30 years and significantly contribute to GDP growth. Often they are propelled by demographic, infrastructure and technology changes.
We have been tracking a new SuperCycle that relies on data and data analysis: The Data SuperCycle. It will create huge value and at DYDX Capital we believe it is going to be the defining economic wave of the 21st century.
Drivers of the Data SuperCycle
1. Demographic Change: Millenials and Gen Z are the largest US cohort and first digital native population. They are running the economy and demanding more data tools.
2. Rapidly Scaling Infrastructure: Large incumbents and new upstarts are spending 100s of Billions of dollars on new GPU clusters, LLMs and Data Centers to power Data Analysis.
3. Technological Paradigm Shift: The acceleration of data science, beginning in 2014, has rapidly progressed from machine learning to deep learning to AI unlocking vast reservoirs of data.
Together these drivers are increasing the speed of market change unlocking vast opportunity for new companies to capture value.
When did it begin?
At DYDX Capital we think that the evolution of analysis tools is the greatest influence in creating and maintaining the SuperCycle. We tried to track this evolution over time to understand how it evolved and what runway it might have.
To do this our team at DYDX Capital analyzed the time point when different waves of data science technology experienced an inflection. Our approach was to measure the usage of key terms associated with data analysis in databases from the academic literature, start-up company data repositories and web traffic datasets. We included the broad term “data science” as well as “machine learning”, “ML”, “deep learning”, “AI”, and “LLM” among others. Using “data science” as a starting point we saw a large inflection in usage around 2014. This moment had been building on the back of a strong and growing interest in data science which began around 2010 and centered on big data. Consequently, we mark 2014, when we observe the tipping point, as the very beginning of the Data SuperCycle. A couple of years later, over 2016-2017, we see an inflection for “machine learning” and then a few years later we see AI take off (2019) culminating in 2022 with the release of ChatGPT and its underlying LLM.
While the timepoints can no doubt be moved a year or two, overall, we believe that the very beginning of the Data Supercycle was close to the year 2014. At DYDX Capital, we also think that there is an interesting, nested technology cycle of 2-3 years for new data analysis technologies to hyper-evolve. It appears that there is a complex interplay between data availability and type that understandably shapes data science advances. While the world does not fully understand this sub-cycle, at DYDX Capital we think that a new technology wave is imminent. Already over 2024, with the increase in reasoning-based AI models, perhaps it is well underway. Most importantly we think that even though the Data SuperCycle may have begun 10 years ago it has many, many years before its likely peak.
We already see the effects of the SuperCycle in Capital Markets
The NASDAQ has significantly outperformed the DOW over the last decade. In large part this has been due to the value created by data focused companies, whether it is incumbents powering compute such as Microsoft and Amazon, or infrastructure companies, like chip maker, NVIDIA, the impact has been significant. Notably nine of the ten largest companies on the index were venture capital backed. Now, OpenAI, Anthropic and xAI, among many others, are positioned to continue this momentum. Venture Capital and company builders are at the beginning of a new partnership in value creation and capture that is accelerating. It will come from using the data infrastructure being put in place to solve hard problems. Investing in the Data SuperCycle to build these companies is a huge opportunity and that’s our mission at DYDX Capital.