Hi everyone,
This question has been bugging me for a while: if one wants exposure to AI value creation in the market, what is the best way to get it?
It is confusing because one can find arguments for and against most types of AI players:
\- AI compute hardware providers, like NVIDIA: the shovels of the AI boom, problem being that it is likely that improvements in compute efficiency/requirements (thinking Deepseek like) eventually reduce the need for compute
\- AI hyperscalers/data centre providers: very capital intensive business model, which is not exactly a pro in terms of potential for value creation; also, currently reliant on purchases by AI models which make little to no revenue relative to the capital they are investing
\- AI models: I assume they will eventually figure monetisation out, but thus far it is a capital intensive business with little to no monetization and lots of players/competition
\- AI users: maybe some sectors will make great use of AI to improve productivity, but the thing is, if AI is available to all competitors, then productivity may go up and costs go down but margins will stay the same as prices will also decline. If the business did not have a moat before, it will not now (thinking airlines, where real costs have fallen 70-80% over the past 70 years and they remain miserable value creators; only the consumer benefitted)
So, this is more or less my thinking… hence my question. I want exposure to AI as an hedge in case it effectively ends up replacing white collar jobs such as mine, but am having a hard time figuring out how to best play this hand, being mindful that even if AI does scale a lot, it must be accompanied by good business and profit models for it to translate into value creation and stock appreciation.
What do you think about this?
Thank you!