Methods, Sources & Data
Everything the desk publishes rolls up to two instruments and one universe of companies. This page is the single reference for both — the rubric and its weights, the divergence formula, the company set, every named source, the data-freshness dates, how we label a figure, and what would prove us wrong. It's meant to be linked from every metric on the site.
Compiled from the published methodology · data as of 2026-06-30 · the reproducible models are open: github.com/divergentcompute/ai-capex-fragility
Overview
The desk measures one question — the race between the productivity lag and the financing runway — on two instruments. The Fragility Index is a structural read: the equal-weighted average of six filing-sourced indicators across the companies that are the build-out. The divergence gauge is a timing read: a market signal set against a ground-truth signal, quarter by quarter. The Index says how fragile the structure is; the gauge says whether the market's price has detached from the fundamentals. They sit side by side because either alone is half the picture.
The rubric
Each company is scored 0–100 on six indicators (higher = more fragile). The weights are fixed and sum to 1.00. Two indicators have a published closed-form formula; the other four are computed from filings but described qualitatively rather than as a single equation.
| Indicator | What it asks | Weight |
|---|---|---|
| 01 · Depreciation integrity | Are the assets aging faster than the books admit? A life shortened scores zero, regardless of size. | 0.20 |
| 02 · Capex vs demand gap | Is AI capital spending outpacing the revenue that would justify it? The break-even hurdle is set generously. | 0.20 |
| 03 · Insider selling intensity | Pre-scheduled 10b5-1 sales score low; the signal is discretionary selling in a window holding material non-public information. | 0.15 |
| 04 · Circular financing | Is the money going in a loop — investor funds a lab, lab buys the investor's compute, that revenue underwrites the capex? | 0.20 |
| 05 · Energy & diminishing returns | Are power, cooling, and chip economics starting to cap capability gains? The thinnest-data indicator — lowest weight. | 0.10 |
| 06 · Organic end-user demand | Is reported AI revenue genuine paid adoption by independent end-users — or recycled, or rebranded from existing lines? | 0.15 |
Honesty note
Indicators 03–06 are computed only from filing-sourced inputs but do not publish a single closed-form equation; they are read as standing analyst judgments on the 0–100 scale, reviewed each quarter. Indicator scores are internal judgment, read for convergence; figures are sourced or labelled.
Instrument one
A company's composite is the weighted mean of its six indicator scores (missing scores are dropped and the weights renormalized). The Index is the equal-weighted average of those composites across the build-out core (Layers 1–4: compute & infrastructure, hyperscalers & cloud, model labs, AI software). The broader-market comparators in Layer 5 are excluded — they're the control group, not the build-out. It's reproducible from the published per-company scores.
| Reading | Band |
|---|---|
| ≥ 75 | Severe |
| 60–74 | Elevated |
| 45–59 | Moderate |
| 30–44 | Contained |
| < 30 | Low |
Current reading: 49 (Moderate), 2026 Q2. The Index is recomputed from the published company scores; see the live Fragility Index.
Instrument two
The gauge sets a market signal against a ground-truth signal:
M(t), the market term, is the equal-weight mean of three full-window z-scored components of SOXX price behaviour — 63-day momentum, price-to-trend overextension, and 20-day annualized instability. G(t), the ground-truth term, is the negative mean of three deterioration z-scores — AI-layoff share, discretionary insider selling, and the capex gap. The gauge widens when momentum and overextension climb while the fundamentals erode.
| Quarter | M(t) | G(t) | D(t) |
|---|---|---|---|
| 2025 Q3 | −0.82 | 0.98 | −1.80 |
| 2025 Q4 | −0.73 | 0.43 | −1.16 |
| 2026 Q1 | −0.50 | −0.18 | −0.32 |
| 2026 Q2 | 2.83 | −1.23 | +4.06 |
Stated limitation
The gauge standardizes its components over the full window — it is descriptive, not real-time: it carries look-ahead bias and is not a tradeable signal (an expanding-window version is deferred). The +4.06 reading is the strongest move in a four-quarter series (n=4: descriptive, not a long-run signal). It weights its three market components equally; empirical calibration is future work.
The set
Two counts appear across the site, and they measure different things:
| Set | What it is | Names |
|---|---|---|
| Full board | All five layers of the build-out — the Markets tape. | 68 |
| Build-out core | Layers 1–4 (compute & infrastructure, hyperscalers & cloud, model labs, AI software). This is what the Fragility Index scores. | 43 |
| Comparators | Layer 5 — the broader-market control group, excluded from the Index. | 25 |
So 68 = the full five-layer set; 43 = the build-out core (Layers 1–4); the remaining 25 are the Layer-5 comparators that act as a control group. The Fragility Index is computed on the 43, not the 68.
Separately, Explained maps the build-out as three rings — a core of 43, a supply chain of 39 that feeds it, and a demand ring of 21 industries that must pay it back. The ring counts are a different partition from the five-layer board; the enumerated name lists for the 39-name supply chain and 21-name demand ring are not yet published alongside the core.
Provenance
Every figure derives from filing-sourced inputs; where a value cannot be sourced cleanly from a filing, it is shown blank rather than imputed. Each table carries its 10-K / Form 4 accession numbers inline. The indicator pipeline is computed in Python, and the underlying tables are published open.
SEC 10-K filings — accounting & capex tables (e.g. Amazon FY2025 10-K Note 1, accn 0001018724-26-000004). sourced
SEC Form 4 — the insider-selling record (discretionary vs 10b5-1). sourced
SEC 8-K — financing structure (e.g. Nvidia→CoreWeave backstop, 8-K accn 0001769628; OpenAI→AMD 6 GW, 8-K EX-99.1, 2025-10-06). sourced
SOXX daily — iShares Semiconductor ETF price series, the market term for M(t) (soxx_daily.csv). sourced
MIT NANDA / Fortune (Aug 2025) — ~95% of enterprise GenAI pilots show no measurable P&L impact. attributed
Kansas City Fed / BLS — AI-attributable TFP (~+0.07pp/yr). attributed
Michael Burry (Scion) — ~$176B understated depreciation 2026–2028; carried as his allegation, not an audited figure. attributed
github.com/divergentcompute/ai-capex-fragility — data + reproducible models.
CSV tables: depreciation · capex_demand · insider · ground_truth · soxx_daily.
| Dataset | Feeds | Generated |
|---|---|---|
| chart-data.json | divergence gauge, recycling ratio | 2026-06-25 |
| circuit-vitals.json | Circuit vitals (adoption, recycling, players) | 2026-06-30 |
| history.json | Fragility & divergence history | 2026-06-30 |
| payoff-data.json | industry payoff coverage | 2026-06-30 |
| circuit-reports.json | the weekly Circuit report | Week of 2026-06-30 |
Discipline
Credibility is the only thing the desk sells, so every number carries its provenance. Three tags run through the site:
Sourced figures trace to a primary filing with its accession number. Attributed figures are named as such — a short-seller's allegation, a survey, a Fed estimate — never dressed up as measurement. Editorial reads (the regime call, the loop framing) are labelled as Divergent Compute's interpretation of the measures, not a measurement. Unverified figures are flagged or removed. A few standing examples:
· The regime call is Divergent Compute's editorial read of the metrics, not a measurement.
· The recycling ratio moves with provenance, not arithmetic: ~26× on a funded-cash basis, ~21× present-valued at 10%, easing to ~5× when every reported secondary round is admitted as equity.
· The convergence of indicators is weighted as corroboration, not four independent votes — they share a common driver (capex ahead of monetization).
· The self-measurement on the Instrument is n=1, illustrative — directional, not precision.
The exits
The falsifier is built in: if the ground-truth signal turns back up — demand converting, the capex gap closing, insider selling normalizing — the divergence closes and the boom earns its price. We publish the number either way. The full ledger of what would prove us wrong, each with its current reading and status, is the Falsifier Watch — an append-only page that also records every revision we've made, dated. The most recent revisions reconciled the Amazon depreciation figure (the canary: a ~$1.4B run-rate depreciation increase plus a separate ~$920M one-time write-off, FY2025 10-K Note 1), relabelled the divergence gauge as a short-series directional read, and corrected the reproducibility wording (Python pipeline, tables published at /data).
Read next: the live Fragility Index · Capex Watch · the founding data brief · Falsifier Watch.