§ Risk and sensitivity
Capital cycle
Glossary version 2026-07-12.v1 · reviewed July 12, 2026
capital cycle risk
The pattern in which high returns attract investment and new capacity, which can later pressure utilization, pricing, margins, and returns. Low investment can eventually create the opposite effect.
The capital cycle links industry profitability with investment and capacity. When high returns trigger unusually heavy capital spending, supply can grow faster than demand and push future margins and ROIC lower. Reports compare current industry capex intensity with history and flag late-cycle capacity building when the evidence suggests future oversupply risk.