It's strange when so many seasoned Silicon Valley investors express concerns about a tech bubble. Businesses they know well are severally lagging in the supposed tech boom. The supporting cast companies that once quietly sustained the tech ecosystem are now the leaders, leaving many feeling like they are being punched in the gut.

For decades, the Valley thrived on software ascendancy while becoming increasingly disconnected from all things material. With its intricate complexities, software development was the golden goose. Hardware became a "commodity" as giants like Fairchild, HP, Motorola, and Sun kept stumbling. As manufacturing was outsourced to Asia, the belief that hardware is a standardized affair with slim margins became more cemented. The proof was when the brand-owning giants managed to squeeze every penny out of volume-hungry hardware makers trying to establish themselves in their earliest days. Nobody imagined a TSMC or Hon Hai living with wafer-thin margins to be deploying this as a mechanism to drive out competition and emerge stronger in the long run.

GenAI has flipped all this, although not agreed to and accepted by many. It has democratized software development. Tasks that once required extensive coding can now be automated through natural language prompts and assisted debugging. Almost every massive innovation in the LLM space has been replicated and enhanced in days and weeks, increasing pressure on any company relying on feature sets as a competitive advantage.

Conversely, the hardware and networking sectors have become exponentially complex. It is not just about GPUs; ASICs, memory chips, and high-speed connectivity are other examples. Technologies like single-die integration, interposers, and new connectivity standards are now fields with difficult-to-replicate advances even before one gets into the solutions for cooling and power management.

For the Valley, the shift alienation is also because an increasing number are from faraway lands, with executives who are not Valley veterans. If the consumer gadget replacement cycle, driverless trends, and robotics take off vertically, there will be other subsegments pushing down the importance of software businesses.

It is not surprising to hear some veterans fervently arguing that an oversupply-led hardware segment collapse is around the corner. This is perhaps not dissimilar to the arguments of many oil industry veterans in previous decades who could not believe energy companies were being demoted in the ranking tables to be anything but a bubble.

There is no objective way to describe how hardware complexity has skyrocketed while software development difficulties have collapsed. There are many reasons why markets and business cycles might be overextended, but behind them are major secular changes, chief among them is the hardware/software flip.